* Manufacturers' Dec sentiment index +17, service sector +25
* Index seen up further in March, boding well for BOJ tankan
* Recovery broadening helped by demand before sales tax hike
By Tetsushi Kajimoto and Izumi Nakagawa
TOKYO, Dec 9 (Reuters) - Confidence at Japanese manufacturers rose for a second month to a three-year high in December and is predicted to continue rising, a Reuters poll found, adding to the evidence of steady recovery in the world's third largest economy.
The service sector's mood also improved for two consecutive months to its best reading in more than 6-1/2 years -- a sign of broadening economic recovery helped by a weak yen and domestic demand sharpened by a national sales tax hike next April.
Reuters monthly poll of 400 big and midsize firms, of which 268 responded, was held between Nov. 22 and Dec. It bodes well for next week's Bank of Japan Tankan, with which it is strongly correlated.
The sentiment indexes for both manufacturers and non-manufacturers are seen improving further in the next three months -- suggesting economic growth will pick up pace towards the current fiscal year-end in March.
The index of sentiment among manufacturers, derived by subtracting the percentage of pessimistic responses from optimistic ones, rose by three points to plus 17 in December, its highest reading since October 2010.
The index is expected to rise further to plus 22 in March, meaning optimists far outnumbered pessimists, the poll showed.
"The yen is weakening and demand is materialising ahead of the planned sales tax hike," said one machinery maker, which saw its business conditions improving.
"Our business conditions are good although there are some projects that show no signs of recovery. Still, our performance turned out better than expected due to effects of a weak yen," one chemicals maker said.
While confidence among makers of manufactured goods including autos and electric machinery steadily improved, sentiment at some other industries such as textiles/paper and food struggled, with firms complaining about a weak currency inflating the import costs of raw materials.
BOJ TANKAN
Compared with three months ago, the Reuters Tankan indexes for manufacturers and service-sector firms were up five points respectively, signalling steady gains in the BOJ's closely-watched quarterly tankan survey, due on Dec. 16.
The BOJ's last tankan showed manufacturers' mood jumped in the three months to September to a near six-year high, with service sector confidence up a tad, but that both sectors saw business conditions staying largely unchanged in December.