But the source said he could not confirm further details of what Hayami had told reporters as he arrived for a meeting in Basle, Switzerland.

The remark bolsters the impression that Hayami is impatient to stop driving short-term interest rates virtually to zero, an "emergency measure" undertaken almost 17 months ago to ward off a Depression-era deflationary spiral.

The view that the BoJ Policy Board is about to nudge its overnight rate target back up to 0.25 percent was also bolstered when Group of Seven finance ministers, meeting on Saturday in southern Japan, avoided any direct pressure on Tokyo to keep the BoJ from raising rates.

The only factor seen restraining the central bank is persistent weakness in personal spending.

Spending on plant and equipment is the second-largest component of the economy and a driving force in Japan's recovery. But personal consumption, comprising three-fifths of the economy, remains weak. The bank got further ammunition on Monday from machinery orders data, the key early gauge of corporate capital spending. The Economic Planning Agency said core private-sector machinery orders rebounded an unexpectedly strong 4.5 percent in May after four months of decline.

"The rise in core machinery orders after four consecutive months of decline will surely be an encouraging factor for the Bank of Japan, which is warming to the idea of lifting its zero interest rate policy," said Yasunari Ueno, chief market economist at Fuji Securities. "The outlook for corporate capital investment will become more bullish due to the recovery in the orders."

The 4.5 percent increase from the previous month in machinery orders, excluding those at electric power companies and for ships, was well above the median forecast of a 2.1 percent rise in a Reuters survey, exceeding 10 of the 12 forecasts.

The Economic Planning Agency stuck for a third month to its assessment that "machinery orders continue to improve" and its view that capital spending will bottom out in the six months to September. Economists said the May data showed the improvement was spreading beyond the booming information-technology sector. Some economists argue that the bank needs more convincing data of an upturn in private consumption and incomes, which the BoJ has flagged as key to ending the zero-rate policy.

-- (Reuters)