Confidence among major Japanese manufacturers has hit its highest level since 2018, a key business survey showed Thursday, as they bet on a strong post-pandemic recovery despite some setbacks.

The headline index for big manufacturers' sentiment jumped to plus 14 from plus five in March, marking the fourth consecutive quarter of improvement, according to the Bank of Japan's Tankan business survey, a quarterly poll of about 10,000 companies.

The index readings are calculated by subtracting the percentage of respondents who say conditions are poor from those who say they are good. A positive reading means optimists outnumber pessimists.

The figure for large manufacturers has improved for four straight quarters, after plunging into negative territory in April 2020 for the first time in seven years.

For medium-sized firms, confidence was up to plus five from minus two, while sentiment for small companies rose to minus seven from minus 13.

Among non-manufacturing firms, it picked up only slightly from minus one to plus one, with spending hit by successive virus measures this year.

"All told, the survey bolsters our view that a weak start to the year will soon give way to a strong recovery," said Tom Learmouth, Japan economist at Capital Economics, in a note.

"We think GDP will be back at pre-virus levels by the end of this year, and back at its pre-virus path before the end of 2022."

But others were less optimistic, pointing to the continuing weakness in sentiment among smaller firms and outside the manufacturing sector.

"Even for large manufacturing firms, the forward-looking outlook index was mixed, with large and medium-sized manufacturing firms and small non-manufacturing firms expecting conditions to deteriorate," wrote Robert Carnell, regional head of research for Asia-Pacific at ING Economics, in a note.

He added that the survey suggested that the best of the recovery in activity from the 2020 COVID-19 hit has passed.

Japan has seen a smaller virus outbreak than many countries, with around 14,750 deaths despite avoiding harsh lockdowns.

(With input from AFP, Reuters)