A closely watched survey out Wednesday showed confidence at big manufacturers approaching a two-year high.

The Tankan index for those firms rose to +12 over the three months to December.

That was ahead of analyst forecasts, and marked a third straight quarter of improvement.

Carmakers saw some of the sharpest gains, as they look forward to a weakening yen and the easing of supply logjams.

Sentiment at non-manufacturers also rose.

It hit +30, improving for a seventh quarter and touching a high not seen since 1991.

Economists say the sector is benefiting from pent-up demand following lockdowns, and a resurgence in tourism.

But the gloomy global outlook could still weigh on the economy, with firms of all kinds expecting conditions to worsen three months ahead.

The numbers will be closely studied by the Bank of Japan as it mulls how to exit from negative interest rates.

Governor Kazuo Ueda has said he won't move until he sees evidence of sustained pay hikes.

The Tankan suggested that could be coming, showing firms still feel they face a tight labor market.

One economist said there was nothing in the numbers to stop the BoJ acting on rates.