TOKYO (Kyodo) -- The business confidence index for major Japanese manufacturers in September remained unchanged from three months earlier at 13, the Bank of Japan's Tankan survey showed Tuesday, reflecting increased demand for semiconductors, while automakers grappled with weak overseas sales.

The index for large nonmanufacturers, including the service sector, rose to 34 from 33, the first improvement in two quarters, as retailers saw favorable sales of clothing and air conditioners amid unusual summer heat.

The sentiment index for manufacturers such as carmakers and technology companies matched the average market forecast in a Kyodo News survey, while that of nonmanufacturers beat the estimate of 32.

The Tankan index represents the percentage of companies reporting favorable conditions minus the percentage reporting unfavorable ones.

Confidence among automakers and steel companies deteriorated notably as they struggled with weakening demand overseas, especially in China, the world's biggest auto market, where sales of Japanese cars slumped due to stiff price competition.

In contrast, sentiment among electronics makers improved sharply due to stronger demand for chip-manufacturing equipment and data centers amid the artificial intelligence boom.

Among nonmanufacturers, sentiment in the hotel and restaurant sector rose 3 points to a record-high 52, helped by a surge of inbound tourists.

A growing number of companies in the sector are managing to pass on increased labor costs, boosting their view of the economy, the BOJ said.

"Overall business sentiment was better than expected," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. "The results will encourage the BOJ to move forward with its efforts to normalize policy."

The latest data will be among the materials assessed at the BOJ's policy-setting meeting in late October.

The BOJ is looking to tighten further after ending its negative rate policy in March and raising its policy rate in July to around 0.25 percent from a range of zero to 0.1 percent, saying it saw signs of economic recovery.

On foreign exchange, Japanese companies expect the U.S. dollar to trade at 145.15 yen in fiscal 2024, up from 144.77 yen in the previous survey in June.

While the yen rose sharply after the BOJ's rate decision in July surprised the market, some companies revised their currency forecasts based on the yen's weaker-than-expected level in the first half of the fiscal year.

"The companies' yen estimates are weaker than the current level," said Shunsuke Kobayashi, chief economist at Mizuho Securities Co. "We need to be mindful of the possibility that it could dent their earnings, although the overall economy seems to be growing at a cruising speed."

Looking ahead, manufacturers' sentiment is expected to improve slightly to 14 from 13. In contrast, nonmanufacturers project sentiment will worsen to 28 from 34.

The BOJ surveyed 9,038 companies, of which 99.2 percent responded between Aug. 27 and Monday.