Business confidence among major manufacturers improved in the April-June quarter and fiscal 2006 corporate capital spending is expected to post double-digit growth, the Bank of Japan's "tankan" survey showed Monday, increasing the likelihood that the central bank will raise the key short-term interest rate in July.

The BOJ said its business sentiment index came to 21 for large manufacturers, compared with 20 in March. The reading is in line with the average market projection of 21.

The index for major nonmanufacturers rose to 20 from 18 in the previous survey. It is the highest reading since the index hit 20 in February 1992.