The Bank of Japan's tankan survey released Wednesday reflects Japanese firms' recent business conditions, including higher input costs, labor shortages and still-accommodative funding conditions. "These factors suggest that the Bank of Japan's June policy rate hike was appropriately timed," says Harumi Taguchi of S&P Global Market Intelligence. "While the outlook indicates that cost pass-through will continue, expectations for future borrowing interest rates are also rising," the economist says. "The Bank of Japan is likely to proceed with monetary normalization while closely monitoring the impact of higher interest rates, especially on small and medium-sized enterprises."(megumi.fujikawa@wsj.com)