* MSCI world equity index up 0.3 pct at 289.58
* Yen falls, Japanese shares gain on BOJ easing speculation
* Oil firmer; government bonds slip
By Natsuko Waki
LONDON, Aug 19 (Reuters) - World stocks hit a one-week high on Thursday as an upbeat German growth forecast and optimism on consumer demand spurred buying in risky assets, while the yen fell on speculation Japan may ease monetary policy further.
The Bundesbank said the German economy is set to brow by around 3 percent this year, better than a previous forecast of almost 2 percent. Germany registered the fastest expansion since reunification of 2.2 percent in the second quarter.
A surge in UK retail sales in July, Wednesday's upbeat sales
forecast from U.S. discounter Target
"The positive news from the Bundesbank... is giving the markets a boost on a day where volumes are quite low," a London-based equity trader said.
MSCI world equity index <.MIWD00000PUS> rose 0.3 percent to hit its highest in more than a week. The Thomson Reuters global stock index <.TRXFLDGLPU> also rose a third of a percent.
The FTSEurofirst 300 index <.FTEU3> erased early losses to
stand up 0.7 percent on the day. U.S. stock futures rose around
half a percent, pointing to a firmer open on Wall Street
Emerging stocks <.MSCIEF> gained 0.6 percent.
U.S. crude oil
JAPAN'S OPTIONS
The yen fell 0.2 percent to 85.55 per dollar
The Bank of Japan is lining up its options in case it needs to ease monetary policy next month. If the BOJ were to ease, the most likely option would be to offer more cash to the market by expanding a fixed-rate, cheap loan scheme for banks put in place in December.
"We fully expect additional easing to materialise given intense political pressure as the government is fully aware that it has only limited room to provide additional stimulus to support the Japanese economy which has lost upward momentum sharply," Bank of Tokyo Mitsubishi UFJ said in a note.
The dollar <.DXY> was up 0.1 percent against a basket of major currencies.
(Editing by Patrick Graham)