A ray of sunlight is breaking through the clouds. That may be one way to describe the state of Japan's economy, judging from the latest "tankan" quarterly survey of business sentiment. The March report from the Bank of Japan, released Monday, says the confidence index for major manufacturers has stopped falling for the first time in 15 months and is expected to rise in coming months.

In fact, with the U.S. economy recovering, production trends in some sectors are looking up. Stocks of unsold goods are shrinking. The weaker yen is boosting export earnings. The Nikkei stock index, which dropped below 10,000 yen earlier this year, has rebounded to the 11,000 yen level, reflecting in part the government's curbs on short selling. Companies across a broad spectrum of industries are expecting increased sales and earnings in fiscal 2002.

It is premature to conclude, however, that the economy is out of the woods. Business capital spending, a key engine for growth, remains sluggish. Prospects for consumer spending -- which accounts for about 60 percent of the nation's gross domestic product -- are clouded by paltry wage increases this spring and waves of layoffs. Deflation continues amid falling consumer and land prices.