The country's big four megabanks have all recorded strong profits, with several of their smaller rivals also improving their performance.

The recovery follows gains on Japanese stocks, with the Nikkei index up 28% over the six months to September.

A massive one-off tax rebate from Tokyo City government has helped prop up profits, while bad debts are receding.

Mixed picture

However, not all the banks are performing well.

Resona Bank - nationalised in June this year after a near-collapse - said it had group net losses of 1.77 trillion yen, and said its full-year loss would only be slightly better.

And analysts fear that regional and city banks may not be keeping up either.

Still, UFJ's declaration of 179.85bn yen ($1.65bn; �970m) in half-year profits - more than double last year's performance - was encouraging.

The group said its bad debts had fallen 10% to 3.71 trillion yen over the six months.

And Mizuho, the biggest of the big four, turned around last year's 39bn yen loss for the six months into a 255.4bn yen profit.

Mitsubishi Tokyo's improvement was even more marked, reporting half-year profits of 301.9bn yen after a loss last year of 188bn yen.

The fourth of the Big Four, Sumitomo Mitsui, reported a 143.5bn yen profit, up from 55.1bn yen a year earlier.

Dollar fears

The solid figures may go some way towards reinforcing the impression that the fragile recovery is gathering pace.

Trade and industrial activity figures released a week ago were reassuring, while recent economic growth has proved solid at an annualised 2.2%.

And economists are beginning to suspect that three years of relentless deflation - falling prices, which handicap domestic demand - could be coming to an end.

But the strength of the yen remains a significant cause of concern.

The US dollar is weakening steadily, as the US trade and government deficits both widen.