The Bank of Japan maintained its upbeat economic assessment for eight of Japan's nine regions in a quarterly report on Thursday, signalling that the country is on track to emerge from recession without additional monetary easing.
It cut its assessment for one region, the northernmost prefecture of Hokkaido, where factory output took a hit from declines in public works spending.
"All regions, including Hokkaido, said their economies were recovering or recovering moderately as a trend against the background of firm domestic demand, a pick-up in overseas demand and steady improvements in job and income conditions," said the report, issued at a meeting of the BoJ's branch managers.
Japan's economy slipped into recession in the third quarter of last year as a sales tax hike in April cooled household spending. Many analysts expect growth to rebound as the tax-hike pain subsides.
BoJ Governor Haruhiko Kuroda stuck to his optimistic outlook, telling the branch managers' meeting that the world's third-largest economy is recovering moderately as a trend.
"We will adjust policy as needed, looking at upward and downward risks to the economy and prices," he said.
The quarterly report comes ahead of next week's rate review, where the BoJ is likely to raise next fiscal year's economic growth forecast but cut its consumer inflation projection due to slumping oil prices.
Any cut in its inflation forecasts will underline the challenges of achieving the BoJ's 2 per cent target and keep it under pressure to ease monetary policy again.
Having eased policy in October last year, many BoJ officials hope to hold off on action next week. They argue that while the rout in global oil prices will slow inflation short term, falling fuel costs are positive for the economy and will help push up prices in the long run, reflecting the recovery.
But the benefits of lower fuel costs have yet to spread to broader areas of Japan, according to the regional report.
"While some small firms said they are feeling the positive effect of oil price falls, others said the benefits haven't spread enough yet," the report said.