The Bank of Japan is expected to revise up its economic forecast for the year to March 2011 at its next policy meeting on July 14-15, the Nikkei newspaper reported on Friday.
But the central bank will maintain its current easy monetary policy as downside risks for the economy remain, such as the possible fallout from Europe's debt problems, the paper said.
The BOJ currently forecasts economic growth of 1.8 percent for the current year that started in April. It is expected to revise this up to growth of 2.5 percent or higher, the paper said without citing sources.
It will likely maintain its forecast of 2.0 percent growth for the next fiscal year ending in March 2012, it said.
At its next policy meeting, the BOJ will review its long-term growth and price forecasts issued in its semiannual outlook report issued in April.
The government last month revised up its economic forecast for the current fiscal year to 2.6 percent from 1.4 percent.
(Reporting by Leika Kihara; Editing by Joseph Radford)