He admitted that the team struggled with tyre degradation during the morning session on Friday but that in the afternoon the long-run pace of the car was encouraging.
"We had quite a good long run in this session so we don't think we're eating up the tyres too much," said Hamilton.
"In the first session we did chew up the tyres a bit but that was mostly due to the set-up of the car, we had a very oversteery set-up."
The 2008 world champion still believes that it is too early for Mercedes to contend for victories, but is hopeful that its race pace this weekend will be better than it was in Melbourne a week ago.
"I think we are stronger race-pace wise," he said when asked if he expects Mercedes to be as competitive in Malaysia as it was in Australia.
"When we did the long-run, it felt pretty strong.
"It felt quick and better than it did in the last race and fingers crossed it will be.
"We have taken a step forward on long-run pace but the others look pretty quick as well so it's difficult to judge where we are.
"The Lotus looks really quick and it's not until after I analyse the laps that I can judge how good ours was."
Team-mate Nico Rosberg shares Hamilton's enthusiasm about race pace.
But he does have reservations about the car's single-lap pace having focused on the long runs today.
"It wasn't such a good day for us on outright pace," said Rosberg.
"We have been concentrating on the long-run performance because that was a little bit our problem in Melbourne and we're doing better there.
"On the short run, it wasn't looking that great so maybe we're a little bit behind."
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