Business confidence at major manufacturers has risen to its highest level since June 1997, according to a key business survey released Thursday.

The Bank of Japan’s “tankan” survey for March, which marked a fourth straight quarterly improvement for large manufacturers, also showed that large nonmanufacturers were upbeat for the first time in more than seven years.

This indicates Japan’s export-led recovery is widening.

The confidence index for large manufacturers for March rose 5 points from December, hitting 12 and nearing the 13 recorded in June 1997. The index for large nonmanufacturers rose from 0 to 5, marking the first positive figure since it posted 1 in November 1996.

The business confidence index represents the percentage of companies reporting that business conditions are good minus those reporting that conditions are bad.

“The improvement in the confidence of nonmanufacturers implies that domestic demand has also started recovering” following exports, said Ryutaro Kono, chief economist at BNP Paribas Securities (Japan) Ltd.

The index for large retailers, for example, improved from minus 9 to plus 3.

Smaller companies also showed signs of growing confidence about their business conditions, although their indexes were still below zero.

The index for small manufacturers improved to minus 3 from minus 10. The index for small nonmanufacturers rose to minus 20 from minus 25.

The same survey also showed that large manufacturers were especially optimistic about growth in fiscal 2004.

Large manufacturers were anticipating that pretax profits would amount to 5.13 percent of sales in fiscal 2004, providing that the dollar stays in the 108 yen range.

A figure in excess of 5 percent is “extremely high,” as it exceeded 5 percent only during the bubble era, said Masaaki Kanno, chief economist at J.P. Morgan Securities Asia Pte. Ltd.

A steep rise in the yen against the dollar, however, would stymie the economic recovery, Kanno said.

But if the yen appreciates at a moderate speed and stays within a range of 95 yen to 100 yen, most large manufacturers should be capable of generating a profit, he said. Profits generated from strong exports to the United States and China would more than offset expected losses arising from a stronger yen, he explained.

The dollar fell to the 103 yen range Wednesday in Tokyo for the first time in nearly four years.

The latest survey was the first to feature a new, bigger set of corporate samples, which was adopted for the first time in five years to better reflect the nation’s evolving industrial structure. The number of samples increased from 8,204 to 10,562, with a greater emphasis placed on Internet-related firms.

The survey was conducted from Feb. 23 to March 31, with 96.5 percent of those polled responding.