Business sentiment in Japan rose to its highest level in almost six years in the September quarter, the closely-watched Tankan survey showed, a good sign for Prime Minister Shinzo Abe as he announced the go-ahead on Tuesday for a controversial rise in Japan's sales tax.
The headline index of sentiment among big manufacturers rose to plus 12 in the three months to September from plus 4 in the June quarter, well above analyst expectations in a Reuters poll for a rise to plus 7, the Bank of Japan's (BOJ) Tankan survey showed. It was the highest reading since December 2007.
(Read more: Abe to rule on sales tax: Will he, won't he?)
There was also an improvement in sentiment among large non-manufacturing firms, with the headline confidence index rising to plus 14 in the September quarter from plus 12 in June.
"Companies have certainly become more optimistic and this is a major impact of Abenomics," said Martin Schulz, senior economist at the Fujitsu Research Institute, referring to the radical economic policies of Japan's prime minister.
A rise in business sentiment is important as it suggests Japanese firms may be more willing to raise wages - something that the government sees as key for ending deflation.
Japan's economy, the world's third largest, has shown signs of a recovery in recent months thanks to aggressive monetary stimulus from the BOJ and fiscal stimulus from the government.
(Read more: Japan's consumer inflation rises to 5-year high)