Japan's Yosano sees growth upgraded to over 2 pct

TOKYO, Apr 16 (Reuters) Japanese Economics Minister Kaoru Yosano said on Sunday he expects the economy to post over 2 percent growth in the year ending next March, and the central bank likely expects such growth as well.

''Looking at various indicators, the economy is getting better,'' he told a television programme. ''I expect it to continue for some time.'' ''People should take a look at the Bank of Japan's outlook report. The BOJ and the government's thinking are similar ...

we expect growth to be higher. I forecast growth to be above 2 percent for this fiscal year.'' The BOJ will release its semi-annual outlook on the economy and prices for this year and next on April 28.

Markets will be closely watching the report to gauge when the central bank may lift short-term interest rates from zero.

In its previous October report, the BOJ's nine-member Policy Board forecast the economy would grow a median 1.8 percent in fiscal 2006/07. The government has predicted 1.9 percent growth.

Yosano declined to be drawn in to whether the BOJ may raise interest rates in June or July, as speculated by some market players, saying it would have to happen at some point but he did not know when.

He added the BOJ would not likely want the timing of such a move to be affected by the government, which may seek to declare an end to deflation later this year.

Asked about rises in interest rates across the board in the wake of the BOJ ending its hyper-easy ''quantitative easing'' monetary policy on March 9, Yosano said rates were beginning to reflect economic conditions, and it was not a time for the government to comment.

The yield on benchmark 10-year Japanese government bonds (JGBs) struck a 5-1/2-year high on Friday as a jump in 10-year U.S. Treasury yields above 5 percent the previous day unleashed selling across global bond markets.

The 10-year yield rose as high as 1.980 percent, a level not seen since September 2000.

Japan's economy grew a real annualised 5.4 percent in the October-December quarter, the fourth straight quarter of gains.

REUTERS PV RAI1257