After a decade of uncertainty, the outlook is brighter

Increasing exports to countries such as China have lifted corporate spirits in the world's second-largest economy.

The figures are the latest sign that Japan's sputtering economy may be emerging from a decade of stagnation.

The Bank of Japan has lifted its growth forecast three months in a row, while consumer spending is also on the up.

Feeling better

The Ministry of Finance said its measure of business confidence increased to 5.6 points in the fourth quarter, compared with minus 5.2 points in the third.

The companies questioned also forecast a higher reading for the coming three month period.

While economists are still urging caution, concerned that the strength of the yen may damp demand, there is room for optimism.

Japan's economy grew by 0.2% last year and the Organisation for Economic Cooperation and Development is now forecasting a 2.7% expansion in 2003.

The OECD also is predicting consistent growth - albeit at lower levels - for the next three years.

The Ministry of Economy, Trade and Industry's industrial activity index was up 2.2% in September from the month before - double the increase forecast by economists.