By Tetsushi Kajimoto

TOKYO Business morale at big Japanese manufacturers edged up in June, staying in positive territory for a second straight month and reflecting a post-COVID economic recovery though uncertainty remains high amid slowing global growth, a Reuters poll showed.

Underlining the prospects for a service sector-led recovery, the non-manufacturers' index hovered near this year's high, the Reuters Tankan poll showed on Wednesday, bolstering the view that strong domestic demand may offset an export slowdown - a rare thing that would happen to export-reliant Japanese economy.

The monthly poll suggested there would be a steady recovery in business sentiment in the Bank of Japan's (BOJ) closely watched tankan quarterly survey due next on July 3.

The Reuters poll found manufacturers' mood was expected to rise over the coming three months, and service-sector morale would hover above +20.

In the Reuters poll of 493 large companies, of which 232 responded on condition of anonymity, many firms cited the post-COVID rebound in demand as a positive factor, while risks stemmed from overseas economies.

"We can expect a recovery in consumption and inbound demand as the coronavirus pandemic has calmed down," a manager of a paper/pulp firm wrote in the survey, noting that business conditions had turned for the better.

"A prolonged war in Ukraine and intensifying trade frictions between Japan and China have curbed capital expenditures at our clients while competition has heated up with overseas rivals," wrote a machinery maker's manager, who called business conditions "not so good."

The sentiment index for manufacturers stood at +8, up 2 points from the previous month, led by textiles/papers, oil refinery/ceramics, food processing and auto industry, according to the survey, conducted from June 7-16.

The manufacturers' index was up 11 points compared with three months ago. The index is expected to rise to +13 in September.

The service-sector index slipped one point from May to +24 in June, led by information/communications and transport/utilities.

Compared with three months ago, the service-sector index was up three points. The index is expected to drop two points to +22 in September.

The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. A negative figure means pessimists outnumber optimists.

(Reporting by Tetsushi Kajimoto. Editing by Gerry Doyle)