TOKYO (Reuters) — Japan’s machinery orders fell less than expected in May, and that coupled with strong bank lending figures reinforced expectations that the central bank will raise interest rates later this week.

Economic Minister Kaoru Yosano also gave an apparent nod to an end to the Bank of Japan’s zero interest rate policy, saying time was more than ripe to discuss such a policy shift.

As market players braced for a rate increase at the BOJ’s July 13-14 policy-setting meeting, the yen hit a one-month high of around 113.36 yen per dollar Monday while the two-year Japanese government bond yield rose to a nine-year high.

Core private-sector machinery orders, a key gauge of corporate capital spending, fell 2.1 percent in May from the previous month on a seasonally adjusted basis, less than economists’ consensus forecast of a 5.3 percent decline.

Compared with the same month last year, core orders, which exclude those for ships and machinery at electric power firms, rose 15.8 percent, government data showed Monday.

That was higher than a median forecast of an 11.2 percent rise in a Reuters poll.

“The figures are confirmation that capital spending plans for the current fiscal year are strong,” said Tomoyuki Ohta, senior economist at Mizuho Research Institute.

“At this rate, machinery orders will probably rise for the April-June quarter. The figures won’t derail a widely expected interest rate hike from the BOJ this week.”

The BOJ is expected to raise interest rates from zero for the first time in six years on Friday when it ends a two-day policy board meeting, raising the overnight call rate to 0.25 percent.

The increase potentially would mark the start of a period of slow-paced credit tightening as the economy shakes off deflation.

“The environment for discussing the lifting of the zero interest rate policy is more than ripe,” Yosano told Reuters in an interview.

“Whether it is July or August, there is not much difference.”

Yosano added that halting the policy would remove an factor of uncertainty from the market and that he saw no need for the government to ask the BOJ to delay a decision to end zero rates.

Representatives of the Ministry of Finance and the Cabinet Office sit in on BOJ policy-setting meetings. They cannot vote on policy but they can ask the board to delay decisions.

Chief Cabinet Secretary Shinzo Abe remained cautious about any premature rate increase, reiterating on Monday that it was desirable for the BOJ to keep the zero rate policy for a while.

But recent comments, including those from Yosano, suggesting that the government would want to respect the BOJ’s independent policy decision have prompted views that it would probably not ask the BOJ to delay decisions.

While machinery orders, a highly volatile figure, declined in May after a much stronger than expected 10.8 percent rise in April, the figure was unlikely to change the BOJ’s view on the prospects for corporate capital spending.

The BOJ will likely upgrade its assessment of the economy in a monthly report due Friday, saying the economy is “gradually expanding” rather than just “recovering,” BOJ sources said.

The BOJ has not used the word “expansion” in its basic assessment since 1991, around the time of the bursting of Japan’s asset price bubble.

“Capital spending is rising faster than we had expected while consumption is a bit weaker. As a whole, the economy is moving in line with our expectations,” said a senior BOJ official, who declined to be identified.

Financial markets have also factored in a possible rate increase later this week. A Reuters poll showed last week that 32 of 41 analysts and traders said they expected a July hike.

Earlier Monday, BOJ data showed bank lending rose at its fastest annual pace in more than five years in June, adding to views that a rate hike would take place this week.

The balance of outstanding loans held by Japan’s four main categories of banks, including “shinkin” credit unions, rose 1.7 percent from a year earlier to 444.83 trillion yen ($3.91 trillion).

It was the biggest year-on-year rise since the central bank began its current calculation method in January 2001, providing further evidence that a five-year era of declining bank lending was over as companies boost capital spending.

“Bank loans are increasing because the size of each loan has become bigger and demand for capital expenditure has gotten larger due to the improving economy,” said Takeshi Minami, an economist at Norinchukin Research Institute.

Separate BOJ data showed that Japan’s most widely watched measure of money supply - M2 plus certificates of deposit - rose 1.2 percent in June from a year earlier.