Japanese business sentiment climbed to an eight-year high in June, according to the Bank of Japan's quarterly tankan survey, bolstering the case for further interest rate hikes. The headline index for big manufacturers rose to plus 22 from plus 17 in March, beating market forecasts of plus 16 and marking the highest level since March 2018. Big non-manufacturers' sentiment edged up to plus 37 from plus 36, also topping expectations and reaching the highest since August 1991, driven by strong inbound tourism and progress in passing on costs. Corporate inflation expectations hit record highs, with firms projecting inflation of 2.6 percent both three and five years ahead, up 10 basis points from the previous survey. Big firms plan to increase capital expenditure by 11.5 percent in the current fiscal year ending March 2027, exceeding the median market forecast of a 10.5 percent gain. The results dispel concerns that the Middle East war could derail Japan's economy and add to arguments for another rate hike by year-end, possibly in October.