Confidence at major Japanese manufacturers fell over the last quarter, as the export-reliant country battled a strong yen and an increasingly precarious global economy, a key central bank survey showed Thursday. In the Bank of Japan's “tankan” survey of business sentiment, the main index for big manufacturers fell to minus 4, in the first deterioration in two quarters. Three months ago, it stood at 2, as companies rebounded from the devastating March earthquake and tsunami in northeastern Japan. The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable, with 100 representing the best mood and minus 100 the worst. The result is slightly worse than Kyodo News agency's average market forecast for a reading of minus 2. The tankan “underscored the faltering Japanese economy, which rebounded impressively from the March disaster until early summer but lost its steam from then mainly due to the external factors,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan, in a note to clients. The world's No. 3 economy expanded at an annualized rate of 5.6 percent during the July-September period in a robust recovery from the earthquake and tsunami. But that pace has already slowed considerably in the face of global headwinds, economists say. Large manufacturers certainly don't expect to feel better anytime soon. The central bank forecasts the index to fall to minus 5 over the next three months. Japan has been battling a strong yen, which has hit multiple historic highs this year against the dollar. Amid Europe's debt problems and economic uncertainty in the U.S., global investors have looked to the Japanese currency as a relatively safe haven. But Japan relies on exports to drive growth and offset a rapidly aging and shrinking population at home. The yen's appreciation has hit companies such as Toyota Motor Corp. and Sony Corp. hard. When the yen climbs, it reduces the value of exporters' overseas profits when repatriated to Japan. That has pushed companies to shift more production overseas, prompting worries about a hollowing out of Japanese industry. Toyota, poised to lose its title as the world's biggest automaker this year, last week sharply downgraded its earnings forecast for the fiscal year through March and warned of the long-term impact of the runaway yen.“Because of the strong yen, the collapse of the foundation of Japanese manufacturing has begun,” Executive Vice President Satoshi Ozawa said. The most pessimistic of the big manufacturing group was the electrical machinery sector.