The headline measure for the “tankan,” tracking sentiment among large manufacturers, stood at minus 27, an improvement of seven points from the previous survey that came out in July.
The tankan measures corporate sentiment by subtracting the number of companies saying business conditions are negative from those responding they are positive.
That measure had declined for six quarters straight, to an 11-year low, before Thursday’s report.
Sentiment among large nonmanufacturers improved by five points to minus 12.
Worries also remain about a second wave of COVID-19 infections. Japan has never had a total lockdown, and businesses have been trying to return to normal with mask-wearing and social-distancing measures.
The pandemic has squelched overseas tourism, which had sustained economic activity in recent years.
Although exports have been falling in recent months, there are some signs of a recovery as overseas demand picks up. The Bank of Japan has continued to pump ample cash into the system. The government has doled out cash handouts to encourage consumer spending.