But it added: "The momentum for a self-sustaining recovery in domestic private demand remains weak."

"Going from an economy on life support from mortgage refinancings and tax cuts to a self-sustaining recovery requires growing jobs to generate income."

"The dynamics of a self-sustaining recovery are in place."

The alternative forecast is for a self-sustaining recovery that is already under way.

The bank said that, while the economy was improving, "there is not yet sufficient momentum to support self-sustaining recovery in business fixed investment and private consumption".

But even Mr. Sakaiya, who has been among the most optimistic appraisers of the economy, hesitated to say that Japan had embarked on a self-sustaining recovery.

The central bank's governor, Toshihiko Fukui, said through a deputy that the chances are rising for a self-sustaining recovery with domestic spending, and not just exports, driving the economy.

"People inside the bank are not convinced the economy is in a self-sustaining recovery, and they're worried about the rise of the yen and bond yields," he said.

To generate the self-sustaining recovery that has eluded Japan since 1990, consumers and companies must spend more and save less, Mr. Lilley said.

Japanese officials - unembarrassed by a long history of prematurely declaring economic victory - talk breezily about "self-sustaining recovery."