Bank of Japan policy board members cautioned about the market’s excessive optimism toward the U.S. economy, according to minutes of their Jan. 24-25 meeting.

Given that the U.S. “economy continued to be burdened with balance-sheet adjustments, the prevailing view among market participants about the economic outlook might be somewhat too optimistic,” the minutes released today in Tokyo said, citing a few of the nine board members.

Japanese benchmark government bond yields climbed to a 10- month high this week on expectations global growth will accelerate and energy and food costs will increase worldwide. The BOJ last month raised its growth forecasts for the year through March and predicted faster inflation.

A few members said market views regarding the U.S. economic outlook would likely “continue to fluctuate between optimism and pessimism,” the minutes said. They said the central bank should watch how U.S. economic developments and moves in U.S. long-term interest rates and foreign-exchange rates affect Japan, according to the minutes.

“Upside and downside risks are broadly balanced,” central bank Governor Masaaki Shirakawa told reporters in Paris today, where he is attending a gathering of Group of 20 finance chiefs and central bankers. “Emerging economies in particular are showing signs of overheating or inflationary bubbles, while developed economies are still undergoing various balance-sheet adjustments.”

Fed Optimism

In the U.S., Federal Reserve policy makers took a more optimistic view of the economy last month while maintaining their dissatisfaction with job growth, minutes of January’s policy meeting released this week showed.

At the BOJ meeting, board members upgraded their forecast for economic growth in the year ending March to 3.3 percent from 2.1 percent, and boosted their predictions for gains in consumer prices in the year starting April to 0.3 percent from the previous 0.1 percent.

Many members said it’s “more likely that the economy would return to a moderate recovery path,” underpinned by a moderate increase in exports and a pick-up in consumption and output. Some said that while the odds of a moderate recovery have increased, “subsequent economic developments remained uncertain,” according to the minutes.

The members also pointed to risks to the Japanese economy stemming from Europe’s sovereign debt crisis, according to the minutes. Many members said European economic risks “had relatively increased,” and a few said if markets become unstable due to the European debt crisis, the damage could “spill over to Japan’s economy to a considerable extent,” the minutes said.

Japan’s gross domestic product shrank less than estimated in the fourth quarter, contracting at an annualized 1.1 percent pace, figures released by the Cabinet Office this week showed. The economy will expand 0.6 percent in the first quarter and accelerate to a 1.9 percent pace by the final three months of 2011, according to the median estimates of 14 economists surveyed by Bloomberg News.