Many business leaders Tuesday dismissed the seemingly encouraging results of the Bank of Japan’s quarterly survey of business confidence as insufficient for ending the central bank’s “zero-interest-rate” policy.

“The current state of the economy does not justify dropping our guard against deflationary pressures,” said Kosaku Inaba, chairman of the Japan Chamber of Commerce and Industry. “Jacking up interest rates would deal a serious blow since Japan still has many companies whose financial health is fragile.”

Yotato Kobayashi, chairman of the Japan Association of Corporate Executives and former chairman of the Japan-U.S. Business Council, concurred, saying the time for the central bank to scrap its ultraeasy monetary policy may be after summer.

“By the end of the year, conditions that may open the way for an abolition of the ‘zero-interest-rate’ policy may be in place,” he said.

The BOJ began guiding the interbank overnight call money rate to essentially zero on Feb. 12, 1999, to boost the profitability and health of the banking industry on the basis of wider lending margins and lower borrowing costs.

The results of the “tankan” survey released Tuesday show that Japan Inc. at its most optimistic point in three years.

But June’s diffusion index for midsize and small manufacturers improved only slightly to minus 21 from minus 26, while that for midsize and small nonmanufacturers improved a notch to minus 27 from minus 28.

Tankan confidence indexes are computed by subtracting the percentage of firms that say their business conditions are in bad shape from those who say their businesses are faring well.

The survey is based on a poll of 9,130 companies.