While its "tankan" survey next Monday will yield clues, the bank needs to digest more data -- at the least through the summer and perhaps well into next year -- before abandoning its ultra-easy monetary stance, economists and other experts say.

"It would be unwise to hint at any rise in interest rates in the future when the economy is still, so to speak, in an uncertain situation," former senior Bank of Japan (BoJ) senior official Akira Nagashima told Reuters on Thursday.

"If the economy starts to recover definitely, then that would be the time to think about a change in the zero interest rate policy," Nagashima, a former BoJ deputy governor for international affairs, said. "But for the time being, that would be rather remote. It certainly depends on various economicindicators coming out from now on through the summer."

Speculation that the BoJ would tighten its hyper-easy stance sooner than anticipated heated up on Wednesday after BoJ governor Masaru Hayami said the economy had "clearly" stopped worsening and that the present policy could not go on forever.

On Thursday, though, the rate rise fever subsided after BoJ Policy Board member Kazuo Uenda said the economy was likely to remain weak and that the central bank's position was very similar to ideas put forward by US economist Paul Krugman, who has said it is better for a central bank to say it will not raise interest rates even if there is a slight recovery.

The central bank's official discount rate has been at a rock-bottom 0.5 per cent since September 1995 and since February of this year the BoJ has been flooding the money market with funds to guide the key overnight call rate to around zero.

Caution persists ahead of Monday's release of the "Tankan" survey, widely expected to show its second quarter ofimprovement in corporate sentiment after a surprisingly strong economic performance in January-March reported earlier this month.

But economists said even a robust "tankan" would not be enough to persuade the BoJ that the time to tighten was at hand.

"I think the Bank of Japan would be absolutely mad to raise interest rates at this stage," said Russell Jones, chief economist at Lehman Brothers. "The economy is still terribly fragile."

Among the evidence of real recovery the BoJ is seeking aresigns personal consumption and capital spending are improving and price data proving deflationary pressures have disappeared.

How soon convincing evidence will emerge is of course the key question. With recent data mixed, opinions differ but most economists agree the BoJ needs at least to see economic data for the summer months before drawing any conclusions.

The government has also made clear that April-June gross domestic product (GDP) data due out around September 10 will be a vital factor in deciding whetherfresh public spending is needed to ensure the recovery which Prime Minister Keizo Obuchi has made the central plank of his political platform.

"Obviously they (authorities) made a big mistake last time by tightening too quickly on the fiscal side," said Peter Morgan, economist at HSBC Securities.

A sales tax rise from April 1997 has been cited by many as a key culprit in killing an earlier recovery.

"This year would be cutting it pretty close," he said. "But if things keep gradually improving, there is quite a reasonable chance you could see it (a BoJ move to tighten) in the first half of next year."

Others said convincing recovery data would not surface until much later, while the central bank would also want to see the effect of a possible shift to a tighter fiscal stance next year.

Most economists expect a stimulative extra budget later this year to maintain growth but some say authorities will try to wean the economy from its addiction to public spending in 2000/2001.

"There will be a verydetailed look at the economy and whether it is going to survive an eventual and inevitable shift to fiscal contraction," said Jeff Young, chief economist at Nikko Saloman Smith Barney.

Some, indeed, believe the BoJ's best move would in fact be a further easing of credit to make recovery a sure thing.

"I would actually go further and say, if anything, the BoJ needs to get more expansionary," Lehman's Jones said. "It needs to get ahead of the curve and look ahead to the weakness in final demand going forward."