The Bank of Japan said its latest Tankan quarterly survey showed business confidence had improved in the past three months, with the large manufacturers' index rising to +12 from +7.
The key index for March hit the highest level since June 1997, when it was at +13. It showed improvement for four consecutive quarters as the world's second-largest economy continues to recover on the back of booming exports to Asia.
The index of large non-manufacturers, which had been a weak spot in the current economic recovery, also showed their sentiment improved to +5 from zero. It moved into positive territory for the first time in more than four years and hit the highest level in more than a decade, since the May 1992 survey, when the index was at +8.
Looking forward, the surveyed major firms remained optimistic, with the sentiment index for large manufacturers forecast at +12 for the June Tankan and at plus seven for large non-manufacturers.
As a detailed study of Japanese businesses and their plans for the months ahead, the Tankan survey is the central bank's key source of data for planning its monetary policy. The indices measure the difference between firms saying economic conditions are favourable and those saying they are unfavourable.
The latest Tankan also showed the sentiment index at small and medium-sized manufacturers at -3 in the March survey, improving from -10 in the December survey, hitting the highest level since November 1991, when it was +8.
The sentiment index of small and medium-sized non-manufacturers also stayed in negative territory but improved to -20 from -25 in the December survey. It was the highest level since September 1997, when it was at -18.
