TOKYO -- Business sentiment among Japan's large manufacturers has risen to the highest level since 2018, according to the Bank of Japan's latest Tankan survey released on Friday.

The headline diffusion index of sentiment among large manufacturers came to plus 18 in September, compared with plus 14 in June.

Economists had predicted a reading of plus 13, according to a poll conducted by QUICK, a Nikkei group company.

The Tankan came as a coronavirus state of emergency declaration was lifted across Japan for the first time in half a year, raising the prospect of economic activity returning to normal.

In Asia outside Japan, however, the COVID situation is far from stabilized, halting production and creating shortages of raw materials and semiconductors. Toyota Motor has said it will reduce global output by 40% in September and October. On Thursday, Suzuki said it will temporarily suspend operations at two plants in Japan due to disruptions among its Southeast Asian suppliers.

The DI is derived by subtracting the percentage of companies that regard business conditions as poor from those that are optimistic. The Tankan is one of the earliest and most comprehensive economic indicators in Japan and is closely followed by economists.

The index has been on the rise since hitting a low of minus 34 in June 2020.

Large manufacturers' DI in the next three months is projected at plus 14.

For large nonmanufacturers, the DI for September came to plus 2, compared with plus 1 for June. Economists had predicted a reading of plus 1.

Nonmanufacturers' DI for the next three months is projected at plus 3.