Japan is Thailand's biggest foreign investor, but a survey of the 351 members of the Japanese Chamber of Commerce found that business sentiment in Thailand is "deteriorating" for the first time since 1998.

Firms saying their investments in Thailand would decrease outnumbered those planning to increase capital spending here, according to the poll by the Japan External Trade Organisation (Jetro)

The value of planned Japanese investments in Thailand this year has already fallen 11 percent from 2006, the survey said.

"It was the first time in nine years that we found those results, with sentiment deteriorating continuously," Jetro Bangkok president Yoichi Kato told reporters.

"We found the willingness to invest declined compared to a year before," he added.

The twice-yearly survey, conducted from April 27 to May 23, found the appreciation of the baht was the top concern for Japanese companies in Thailand, following by political instability, economic policies and rising labour costs.

"Japanese firms view that the exchange rate of 37.25 baht to the dollar is a profitable rate. But the current market rate of 34.49 baht makes them lose 7.4 percent in profits," Kato said.

Kiyoharu Yukiyoshi, executive director of JCC Bangkok, said Japanese firms have adopted a wait-and-see stance before making new investments in Thailand.