The Bank of Japan's latest Tankan survey shows that business sentiment among large manufacturers has improved for the first time in two quarters.
Data released on Monday put the sentiment index at plus 13 for the April-June quarter, up two points from the previous survey.
A positive number indicates that more companies are optimistic about business conditions than those feeling pessimistic.
Positive factors include progress among raw-material producers to pass on higher costs to their clients.
Semiconductor output is also recovering, thanks to growing demand for chips powering artificial intelligence.
On the downside, business sentiment sharply worsened in the iron and steel sector, apparently weighed down by the slow Chinese economy and the weaker yen pushing up raw material costs.
Meanwhile, the sentiment index for large non-manufacturers stood at plus 33. Although still high, that's a drop of one point for the first decline in 16 quarters.
The mood among retailers fell especially sharply, and was down 12 points.
Looking three months ahead, the mood among large manufacturers is projected to improve by one point, while that of large non-manufacturers is likely to drop by six points.
The latest Tankan survey was conducted over roughly a month through June, targeting more than 9,000 companies.