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TOKYO, May 19 (Reuters) The yen extended gains against the dollar on Friday after better-than-expected Japanese growth data fuelled expectations that the Bank of Japan will raise interest rates in coming months.

Gross domestic product grew 0.5 precent in the January-March quarter from the previous quarter due to resilient capital spending and domestic demand, beating market forecasts for a rise of 0.3 percent.

''The GDP figure beat the consensus and helped to push the yen higher,'' said Daisuke Uno, market strategist at Sumitomo Mitsui Banking Corp.

The BOJ's monetary policy board is due to end a two-day meeting later on Friday.

The central bank is not expected to change monetary policy just yet, but the yen has been rising in the past month partly in anticipation of an interest rate increase, possibly in July.

The market shrugged off a media report that North Korea may be preparing to launch a long-range Taepodong ballistic missile, traders said.

The missile could have the capacity to reach all of the United States, Japanese national broadcaster NHK reported.

The dollar was at 110.65 yen in early Tokyo trade, down from around 110.80 yen in late New York trade on Thursday.

The euro eased to 142.15 yen from around 142.35 yen. It was little changed at $1.2850.

Sentiment for the dollar was already weak after U.S. Treasury Secretary John Snow reiterated on Thursday his dissatisfaction about the pace of China's efforts to increase the flexibility of the yuan.

Echoing Snow, Edward Lazear, chairman of the Council of Economic Advisers, told Reuters that the Bush administration wants to see further steps in China's yuan reform.

He added that Beijing's recent moves to allow the currency to trade in a wider band were welcome.

Snow also said in his testimony before the U.S. Senate Banking Committee that policy makers in major industrial countries should refrain from commenting on foreign exchange markets.

Snow's comments pushed the dollar down against major currencies as the market took them as a sign that U.S. officials will accept the dollar's weakness to help adjust global imbalances.

Reuters SK GC0650