Tokyo - Japan on Monday said the world's number three economy was on track to expand 2.5 percent in the fiscal year starting in April, thanks to fresh stimulus and a recovery in overseas markets.

Prime Minister Shinzo Abe's cabinet approved the forecast - higher than an estimate of one-percent growth for the current year to March - on Monday morning, government officials said.

The estimate is slightly higher than those from economists who have also upped their outlook on the back of a weaker yen and new stimulus measures, Dow Jones Newswires reported.

“We are forecasting that the economy will recover as the global economy is expected to pick up gradually, while we're also expecting a steady recovery in demand and an increase in jobs” at home, Chief Cabinet Secretary Yoshihide Suga told a press briefing.

The government's top spokesman warned that several factors could impact the final growth figure, including swelling public debt and fluctuations in the yen, a key factor for the country's trade picture.

But Economic revitalisation minister Akira Amari said he was confident the new target would be hit, telling Jiji Press:

“Overseas risks are decreasing.”

Last week, the Bank of Japan raised its growth forecast for the same fiscal year to 2.3 percent from a previous 1.6 percent estimate, as it announced an open-ended asset buying programme and new inflation target aimed at ending the deflation that has haunted the economy for years.

Abe, who took office late December after a landslide national election victory, unveiled a 20.2 trillion yen ($222 billion) stimulus package this month in the latest bid to stoke growth in the limp economy. The figure also includes local government and private-sector spending.

Tokyo's new forecast will be used to produce a fresh budget, with Abe's cabinet set to endorse 92.6 trillion yen in spending on Tuesday, Japanese media reported. - Sapa-AFP