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The government upgraded its assessment of the economy after business confidence in Japan improved significantly in the July-September period from the previous quarter.

The Cabinet Office said Friday in a preliminary report that its business survey index jumped to plus 7 in the reporting quarter from minus 21 in the April-June quarter, marking the first entry into positive territory in 11 quarters.

The margin of increase, at 28 percentage points, was the largest since the 31 points marked during a period in 1987, according to the Cabinet Office.

The BSI is designed to measure corporate managers’ confidence in the economy. It is calculated by subtracting the percentage of those who predict it will worsen from those who say otherwise.

The government revised its economic assessment to “recovering” from “a sign of incipient recovery” in the April-June quarter, marking a second such upward revision based on the index in as many quarters.

The strong reading appears to be good news for the coalition government of Prime Minister Junichiro Koizumi ahead of Sunday’s House of Representatives election, along with a sharp improvement in the key economic gauge released Thursday by the Cabinet Office.

“The reason for the revision is the index entered positive territory for the first time in 11 quarters, and the margin of improvement from the previous quarter was quite big,” said an official who briefed reporters.

The Cabinet Office used the expression “recovering” for the first time in its economic assessment based on the survey, the official added.

Looking ahead, the BSI is expected to improve further to plus 15 in the October-December quarter and to plus 21 the following quarter, suggesting that Japan may be heading toward a genuine economic recovery.

The survey also showed that the index for pretax profit in all industries — except for financial, insurance and real estate firms — improved to minus 1 in the July-September quarter, from minus 8 in the previous quarter.

The index is expected to improve further to plus 5 in the October-December quarter and to plus 6 in the January-March quarter.

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