TOKYO: The Bank of Japan gave a positive read on the economy in its quarterly “tankan” survey Thursday, reporting large manufacturers' sentiment rose to 24 from 22.

The report, widely viewed as a key indicator of Japan's economic vitality, said the sentiment among large non-manufacturers fell to 35 from 37.

The survey shows companies foreseeing good conditions minus those feeling pessimistic. The key indicator of business sentiment has now been improving for the sixth quarter straight.

The positive reading comes despite widespread challenges for Japanese society, including soaring oil prices. The war in Iran has effectively closed the Strait of Hormuz, where resource-poor Japan had previously received most of its oil imports.

Brent is now trading at about USD 98 a barrel, lower than the nearly USD 120 it reached earlier. That's still higher than before the war, when it was trading below USD 70 a barrel.

The Bank of Japan raised its benchmark interest rate twice this year, in June and September, to 1.25 per cent, a three-decade high. The bank cited challenges stemming from a weak Japanese yen and higher prices.

The central bank has been trying to normalise monetary policy lately after decades of keeping interest rates near or below zero.

Higher rates in theory support a stronger currency. But the Japanese yen remains relatively weak, adding to the challenges of rising import prices. The US dollar has been trading at nearly 160 yen, up from 110-yen levels five years ago.

Longer-term problems for Japan include an ageing society, which has resulted in labour shortages and worries about economic vitality in coming years.