Japan's central bank said it expects the country's economy to expand at an even greater rate than it forecast six months ago, but cautioned mild deflation would continue in the current fiscal year.
In its twice-yearly outlook, the Bank of Japan said economic growth would range between 3% and 3.2% in the year to March 2005, up from its October forecast of 2.3-2.6%.
'The economy is expected to continue recovering in the current fiscal year as a pickup in the business cycle intensifies,' the bank said. 'Overall the outlook has improved since the last report was released in October.'
The report said a majority of the nine-member policy board at the bank expected the nationwide core consumer price index to continue falling marginally in the year to March 2005.
Domestic wholesale prices were likely to move to slight gains in the current fiscal year, after falling for years, thanks to higher commodity prices and improved conditions in supply and demand in Japan.
