The feel good factor could be back in the Japanese economy

As expected, it shows the central bank continuing to stimulate the country's economic recovery while trying to turn past deflation into mild inflation.

In April the bank said Japan's economic growth would range between 3% and 3.2% in the year to March 2005.

It now says it expects the economy to expand even quicker over the next year, as it gathers more momentum.

The Bank of Japan's "easy credit", rock bottom interest rates policy has now been unchanged since January.

Earlier this month a business survey showed Japanese firms seeing the best economic prospects since the early 1990s.

The closely-watched quarterly Tankan survey saw business optimism shoot up in June to its highest level since August 1991.