Confidence among major Japanese manufacturers remains weak despite the yen's fall from historic highs and an ongoing tentative recovery following last year's quake-tsunami.
The Bank of Japan's closely watched quarterly Tankan survey came in at -4.
This is its second consecutive quarter in negative territory and below expectations for a reading of -1.
The numbers suggest bosses have a cautious view of a recovery for the world's third-biggest economy.
The figure represents the percentage of companies saying business conditions are good minus those saying conditions are bad. The survey is taken into account by the Bank of Japan when formulating monetary policy.
In February, the bank surprised markets after saying it would increase an asset purchase programme by 10 trillion yen ($120 billion) to about 65 trillion yen amid efforts to kickstart Japan's stagnant economy.
In the survey released today, sentiment among large non-manufacturing firms improved slightly to +5 in March, compared with +4 in December.
Large manufacturers kept their outlook at -4, unchanged from December when concerns about the global economy, Europe's debt crisis and the strong yen weighed.
A strong currency makes Japanese exporters' products more expensive overseas and erodes the value of their repatriated foreign profits. Despite signs of progress in tackling the euro zone's fiscal woes and positive US economic figures, Japanese firms remained cautious with large manufacturers upping their outlook by just one point to minus three for June.
Capital spending plans among big companies also remained unchanged, the survey showed, below economists' forecasts for a slight increase.
Last year's quake-tsunami disaster and record flooding in Thailand - which hit firms with plants in the Southeast Asian country - pounded Japan's already struggling economy.
Last week, Japan posted an unexpected 1.2% on-month decline in February's factory output after two months of growth, casting doubt on hopes the economy was mounting a firm recovery.
