The Bank of Japan in April set an ambitious target of reaching two percent inflation in as many years -- aimed at reversing deflation -- while also unveiling a huge bond-buying programme similar to that used by the US Federal Reserve.Sentiment among big Japanese manufacturers jumped in the quarter to June, a Bank of Japan survey showed on Monday, in the latest upbeat sign for the world's number three economy.
The results come days after separate data showed Japanese factories put in an unexpectedly strong performance in May, supplying fresh evidence that Tokyo's huge drive to boost growth appeared to be taking hold.
Japanese Prime Minister Shinzo Abe's party, Liberal Democratic Party (LDP), faces parliamentary elections this month that are widely expected to see a resounding victory for him, solidifying his power base and giving the premier the legislative muscle to continue an economy-boosting plan dubbed "Abenomics".
The BoJ's quarterly Tankan survey on Monday showed that large manufacturers' sentiment rose to "plus four" from "minus eight" in the previous quarter, representing the percentage of firms saying business conditions are good minus those saying they are bad.
It is the first time the widely watched poll, which is used by the central bank to formulate policy, has hit positive territory since September 2011.
"I don't know if I should credit this to 'Abenomics' or not, but I think the fundamentals of the Japanese economy are improving," said Taro Saito, senior economist at NLI Research Institute.The survey also showed that big Japanese firms are expecting to boost their capital spending by 5.5 percent in the fiscal year to March 2014, underscoring a jump in confidence among the nation's producers.
"Companies' sentiment is improving, profits are improving, so that was a plus for the index," said Mizuho Research Institute economist Haruka Kazama.
Japanese manufacturers, hit hard by the 2008 financial crisis and the 2011 quake-tsunami disaster, have seen their prospects improve as Tokyo's prescription for big government spending and monetary easing helped send the value of the yen tumbling.
A weaker yen boosts Japanese exporters by making them more competitive overseas while inflating the value of repatriated foreign income.
"For 2013, there are hopes that a weaker yen will help boost exports, and that domestic demand would also be firm," Kazama told Dow Jones Newswires.
"Those bright signs are helping end that putting-off trend," she added, referring to companies holding off new investment.
On Friday, official data showed that Japan's industrial production jumped 2.0 percent in May from a month earlier, adding to the improving trade picture as exports to the United States and China surged on the back of a weaker yen.
The rise was the best since December 2011 and beat expectations of a 0.2 percent uptick.
Japan's sleep-walking economy has been given a jolt by Tokyo's bid to drive growth, with the stock market surging to make it one of the world's best performers this year.
However, separate figures on Friday showed consumer prices were flat in May and household spending dropped from a year earlier, underlining the hard work that still needs to be done to end years of stubborn deflation.