Business sentiment at Japanese companies improved during the April-June period, a closely watched Bank of Japan survey showed Tuesday, surprising bears who had braced for a reality check on the markets.

Helped by recent stock price rises and better-than-expected export performance, the diffusion index for large manufacturers -- a key gauge for the nation's business confidence -- rose by 5 points from the previous quarter to minus 5, according to the BOJ "tankan" survey.

It was a reversal from the 1-point drop seen in March, bringing the DI back to levels last seen in March 2001.