Japan's businesses more confident

It looks like Japan's economy and profits are moving again

Japanese businesses are becoming more confident, a survey has shown, underlining the improving state of the world's second largest economy.

The Reuters Tankan index of leading Japanese businesses rose to 20 in September from 16 in August. A positive number indicates increasing optimism.

Concerns have remained, however, and firms stressed the effect of record oil costs on their profit margins.

Conditions are still not good enough to pass the costs down to the consumer.

Confidence boost

Japan's economy has been showing signs of pulling itself out of a period of recession and stagnation that has lasted for more than a decade.

While growth is not stellar, it has been picking up and there has been speculation that the central bank is mulling an end to its policy of zero-interest rates.

Many investors also said they had been heartened by the election victory of Prime Minister Junichiro Koizumi and his clear mandate for a programme of reforms.

For its Tankan survey, Reuters talked to 200 manufacturing firms and 200 non-manufacturing firms.