The Bank of Japan is likely to revise up slightly its economic forecast for the fiscal year starting in April to reflect an expected boost from the government's latest spending package, sources familiar with its thinking said.

Under current projections made in October, the BOJ expects Japan's economy to expand 0.7% in fiscal 2020, accelerating to 1.0% growth the following year.

At its Jan. 20-21 rate review, the BOJ is seen revising up its growth projection for fiscal 2020 to near 1%, taking into account the boost from the government's $122 billion stimulus package, three sources said on condition of anonymity. The conflict between Iran and the United States, however, could potentially change the picture as a spike in oil costs and fears of military escalation could cool global growth and Japanese business sentiment, a fourth source said.