Japan's big manufacturers are more upbeat than they have been for two years, and the mood at other firms has hit 15-year highs, a Bank of Japan (BOJ) survey showed this morning.
Government bond yields rose after the BOJ's tankan corporate sentiment survey on the view that the results, which underscored Japan's steady economic recovery, have heightened the chance of a rate rise in January.
A Reuters poll taken after the tankan release showed that most market traders now expect the BOJ's next rate rise to come next month.
Big manufacturers, a key driver of Japan's economy, stuck to their upbeat view on business conditions, which has been gradually improving over the past two years.
A recent batch of weak economic data has heightened market expectations that the BOJ will skip raising rates at a policy meeting ending next Tuesday and wait until early next year to increase the overnight call rate target to 0.50 from 0.25 per cent.
Many market traders had said the tankan would have had to be surprisingly strong for the BOJ to defy such expectations and tighten credit next week.