The Bank of Japan on Friday raised its view of the economy for the first time in almost three years on signs that the record-setting contraction suffered in the first quarter was probably the worst of the recession.

"Economic conditions have been deteriorating, but exports and production are beginning to level out," the central bank said in a statement in Tokyo Friday. Previously it said the world's second-largest economy had "deteriorated significantly."

It also decided to accept foreign currency-denominated sovereign bonds as collateral to make it easier for lenders to get cash.