According to the financial news app, the confidence index of major Japanese manufacturers has risen compared to three months ago, which has opened the door for the Bank of Japan to consider raising interest rates later this month. The short-term Tankan judgment index for the second quarter released by the Bank of Japan on Monday showed that the reading for June rose from 11 in March to 13, economists had previously predicted that the index would remain unchanged. The large non-manufacturing business confidence judgment index fell from the previous value of 34, which was the highest level since 1991, to 33.

Tankan report is one of the important data released before the Bank of Japan's policy meeting at the end of this month. According to a Bloomberg survey of economists, one out of every three economists expects the Bank of Japan to raise interest rates at this meeting. Due to Bank of Japan Governor Haruhiko Kuroda's promise to closely monitor the impact of the yen on inflation, the yen exchange rate fell to its lowest level since 1986 last week, which prompted some analysts to believe that the probability of the Bank of Japan raising interest rates would increase.

Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, said: "Due to strong business sentiment and high inflation expectations, Tankan data helps to maintain the possibility of raising interest rates in July."

Monday's Tankan data reflects the resilience of most industries, including raising this year's capital expenditure plan to an 11.1% growth. Among them, the textile index rose from 11 to 22, leading the manufacturing industry, and industrial machinery manufacturers also achieved steady gains. After the new safety certification scandal broke out, the automotive industry slipped slightly.

Maruyama said: "The new scandal in the automotive industry is likely to have been priced in, so although the market is slightly deteriorating in sentiment towards the automotive industry, it indicates that the new scandal is not expected to be as serious as previous scandals."

In the service industry, the communication industry has the strongest growth, while the retail industry has fallen from 31 to 19, indicating that consumer spending is weakening in the face of inflation.

Data shows that inflation expectations, which are the main driver of price increases, have slightly increased over the longer term. Although the one-year overall price increase forecast remains at 2.4%, the three-year forecast has been raised to 2.3%, and the five-year annual growth rate outlook has been raised to 2.2%.

Bloomberg economist Taro Kimura said: "The signals from the Bank of Japan's Tankan survey support raising interest rates again. We expect the Bank of Japan to raise interest rates at the July meeting. Indicators related to inflation show that more companies plan to raise prices and believe that consumer prices will remain above the 2% target in the long term."

The surveyed respondents lowered their fiscal year forecast for the yen, with the average yen exchange rate currently at 144.77 yen against the US dollar. On Monday morning, the yen was trading around 160.80 in Tokyo, which had fallen to 161.27 over the weekend, the weakest level since 1986.

The impact of the weak yen on the mood in Japan is mixed. The lower yen has helped exporters achieve record high profits, attracted record numbers of foreign tourists, and benefited regional economies and retailers. At the same time, small businesses and households have had to deal with rising import costs for raw materials, fuel, and food. More and more corporate executives have mentioned this adverse impact.

Despite a slight decline, the atmosphere in the service industry remains strong. According to data from the Japan National Tourism Administration, the number of foreign tourists in May reached a historical high, with a year-on-year increase of 60%, benefiting all sectors from catering to hotels.

However, there are still reasons to be cautious. The Japanese government sharply lowered its first-quarter gross domestic product on Monday, saying that after the construction industry data was revised, the annualized contraction rate rose from the previous 1.8% to 2.9%.

Maruyama said: "The mixed data puts the Bank of Japan in a dilemma when deciding interest rates." Regarding Tankan data, Toru Suehiro, an economist at Daiwa Securities, emphasized the sharp drop in the retail industry and pointed out that inflation is beginning to drag on consumption.

Suehiro said: "The results show that for service companies that deal directly with customers, the suppressed demand after the epidemic and the rise in demand driven by inbound tourism have peaked."