Japanese firms have become more optimistic about the state of the economy for the first time since October 2000.

The surge in business confidence was revealed in the Bank of Japan's quarterly Tankan survey.

Our own forecast is for an anaemic recovery going forward

John Richards Barclays Capital strategist

It follows a number of recent economic indicators that have suggested the world's second largest economy is crawling out of a deep recession.

But some analysts are already concerned that the upbeat outlook is unrealistic.

"I think Japanese people and the government in the last few months have been in a kind of euphoria with unrealistic optimism about the future of the economy," said Yasushi Okada, chief economist at Credit Suisse First Boston.

Trouble at home

The Tankan survey also warned that many companies are still cutting plans for capital investment, underscoring just how fragile any recovery is.

And analysts say any turnaround is based in the export sector, suggesting that firms focused on the domestic market will continue to struggle.

Japan's economy grew by 1.4% in the three months to March, thanks to the surge in exports.

"Our own forecast is for an anaemic recovery going forward," said Barclays Capital strategist John Richards.

And stock markets showed caution in responding to the positive data, falling slightly.

At the end of the morning session, the Nikkei leading index was at 10,613.6, down 8.28 points.