Despite the more upbeat outlook, the bank kept its monetary-easing measures and inflation projections unchanged.
Tokyo: The Bank of Japan on Tuesday upgraded its economic growth forecasts for the current fiscal year and the next two, while leaving its ultra-loose monetary policy intact.
The central bank now expects the world's third-largest economy to expand 1.4 per cent in the year to March and 1.5 per cent over the following 12 months. That compares with previous forecasts of 1.0 per cent and 1.3 per cent, respectively.
It also lifted its forecast for the year to March 2019 to 1.1 per cent from 0.9 per cent.
"The projected growth rates are somewhat higher, mainly reflecting improvement in overseas economies and the yen's depreciation," the bank said in a quarterly outlook.
Donald Trump's victory in November's US presidential election has driven the yen lower on expectations that aggressive fiscal spending by his administration would lead to a surge in inflation and higher interest rates.
A lower yen is positive for Japanese exports as it makes them more competitive abroad and inflates value of income when repatriated.
Despite the more upbeat outlook, the bank kept its monetary-easing measures and inflation projections unchanged as Japan has been struggling to achieve a clear break from years of on-and-off deflation.