Japan's economic recovery, supported chiefly by large, export-oriented manufacturers, is spreading to other sectors, according to the Bank of Japan's quarterly survey on business sentiment. However, it is premature to conclude that the economy is headed for a self-sustaining recovery led by domestic demand.

The "tankan" survey, which was conducted from Feb. 23 to March 31, finds that the confidence index for large nonmanufacturers has turned positive for the first time in seven years and four months. Sentiment in the small-business sector has also improved. The recovery lacks strength, yet activity is steadily expanding, aided by rising corporate profits and higher stock prices. It appears that deflation is receding, if not ending.

Still, uncertainties abound. One is the surge in the yen's exchange value. The economic recovery to date has been fueled largely by exports to China and the United States, Japan's two largest trading partners. The appreciating yen -- which makes Japanese products more expensive abroad -- will likely cut into export earnings. Prices for raw materials are soaring as China steps up imports. Unemployment is stuck at disturbingly high levels. Prospects for consumer spending are clouded.