Business sentiment in Japan improved in the three months to September, the Bank of Japan's Tankan survey showed on Wednesday.
The headline index for big manufacturers' sentiment rose to plus 13, above expectations of plus 10 in a Reuters poll and up from plus 12 in the previous quarter.
"The big manufacturers index is actually quite firm - we had been expecting manufacturing sentiment to come down a little bit considering that economic numbers have slowed but I think the weaker yen is lifting sentiment among manufacturers," said Izumi Devalier, Japan economist at HSBC.
Big manufacturers expect the dollar-yen exchange rate to average 100.73 yen for the 2014/15 fiscal year; the dollar-yen was trading at 109.67 after the data was released.
The report also showed that big firms plan to raise capital spending by 8.6 percent for the fiscal year that started in April, compared with analyst forecasts for a 7.2 percent increase.
"[Fiscal year capex] surprised me a lot," Devalier said. "It's a very strong reading. We've had a string of very bad data over the past months but I think this is encouraging for the central bank," she added, implying that the positive data could rule out further monetary easing in the coming months.
Last month the Bank of Japan held fire on its aggressive stimulus program, launched in the first half of 2013.
"I don't think Bank of Japan stimulus is off the table. I think they'll continue with their super accommodative monetary stance moving into 2015," Jonathan Pain, author of The Pain Report told CNBC Asia's "Squawk Box" on Wednesday.
Devalier added that the positive uptick in capital spending showed manufacturers were confident policy makers intend to keep the yen weak.
"I think they're also very optimistic that the bumps in the domestic recovery are going to wash away sometime soon," added Devalier.
"The Tankan survey was rather pleasing," added Pain.
"We've had a bit of a mixed batch of Japan data recently...Net net I think the data out of Japan has been disappointing, but as we move into 2015, I think the Japanese economy is going to start moving into 'escape velocity,'" he said.
Continued yen weakness will be a key driver, Pain said: "I think it will go to 110, and possibly significantly above that, which will have a material impact on the bottom line of Japanese corporates. The other evidence is that there is some increase in wages as well in Japan, which we've been waiting 20 years for," he added.
To hike or not to hike?
In April, the government raised the consumption tax to 8 percent from 5 percent to rein in the country's budget-to-GDP ratio in its first tax hike in 17 years.
The move took its toll on Japan's economic recovery, leading gross domestic product to contract at an annualized rate of 7.1 percent in the second quarter of 2014.
Analysts have said the performance of Japan's economy over the third quarter will likely determine whether the government proceeds with a second tax hike to 10 percent in 2015.
Strong corporate sentiment makes a second tax hike more likely, HSBC's Devalier said.
"[But Shinzo Abe is] going to have to put together another large stimulus package if he wants to ensure that Japan does not slip back into a recession with the next VAT hike," she added.
Japan's benchmark Nikkei index opened 0.2 percent lower shortly after the data was released.
The upbeat business sentiment reading followed a string of weak data out of the world's third largest economy this week.
On Tuesday industrial production fell 1.5 percent on month, below expectations for a 0.2 percent rise, while household spending fell 4.7 percent on year, worse than expectations for a 3.8 percent decline.
On a more positive note, retail sales rose 1.2 percent on year in August, above expectations for a 0.3 percent rise.