Big Japanese manufacturers' sentiment improved for the first time in six quarters in the three months December to hit a one-year high, a closely watched central bank survey showed, as stock gains and yen falls brightened prospects for the export-reliant economy.
The upbeat outcome reinforces market expectations that the Bank of Japan will hold off on expanding stimulus measures in the coming months.
Service-sector confidence was unchanged from three months ago, the BOJ's "tankan" quarterly survey showed on Wednesday, underscoring the fragile and patchy nature of recovery in the world's third largest economy.
The headline index measuring big manufacturers' business sentiment rose to plus 10 from plus 6 three months ago, the tankan survey showed, matching a median market forecast and hitting the highest level since December 2015.
"Manufacturing sentiment is doing well, reflecting a recovery in global trade," said Hidenobu Tokuda, senior economist a Mizuho Research Institute.
"Capex plans seem a little more cautious than I expected, so this is an area of concern. I think the economy will continue to grow due to exports and public works spending. The chance of additional monetary easing has receded."