Sentiment among large Japanese manufacturers improved in the quarter ended June, the Bank of Japan said Monday, but confidence remained weak amid a lumbering economic recovery.
Large manufacturers' sentiment rose to "minus one" from "minus four" in the previous quarter, the central bank's Tankan survey showed.
The figures represent the percentage of firms saying business conditions are good minus those saying they are bad, and are a key measure used by the BoJ in formulating monetary policy.
The result was better than the median forecast for "minus three" in a poll of economists by Dow Jones Newswires.
The world's third-biggest economy has seen a mixed bag of economic data lately, with domestic demand improving but factory output dipping in May as exports in key markets, particularly Europe, stumbled.
Last month, the central bank held off fresh easing measures, holding key interest rates steady at between zero and 0.1 percent and leaving unchanged a 70 trillion yen ($885 billion) asset purchase programme.
Tokyo has warned that the eurozone crisis is a major hurdle to Japan's economic recovery, while Prime Minister Yoshihiko Noda said at the weekend that his nation's huge public borrowing means it faces similar risks as debt-plagued Europe.
In the survey released Monday, sentiment among large non-manufacturing firms also improved, rising to "plus eight" from "plus five".
Large manufacturers expect further improvement in the next survey, the bank said.