Japan's government raised its assessment of the economy for the first time in two months in August on a steady recovery in industrial production and exports as well as a pick-up in private consumption.
But it also cautioned that the yen's strength, volatile stock markets and a global economic slowdown posed risks to the economy's recovery from the devastating natural disaster in March.
"The Japanese economy is picking up while difficulties continue to prevail due to the earthquake," the government said in its report for August. Previously, it had said the economy was showing upward movements but remained in a severe situation.
The Cabinet Office raised its assessment on industrial production and exports for the first time in two months, saying they are "picking up," led by car makers.
Reflecting an improvement in consumer confidence, the government also upgraded its view on private consumption for the third straight month, saying it is "on the way to picking up."
But the government said downside risks to the economy have risen since it issued the previous report in July due to a jump in the yen and sharp falls in share prices.
Japan's policymakers voiced growing alarm earlier this week as the yen stayed strong despite last week's currency market intervention and as global stock markets crumbled under mounting fears of a new financial crisis.
The Nikkei share average rebounded today after the US Federal Reserve's extraordinary vow to keep rates near zero for two years, but worries about financial markets remain.
Japanese authorities intervened in the currency market last week to stem the yen's sharp rise and the Bank of Japan eased monetary policy by boosting asset purchases on the same day.
Analysts kept their view that Japan's economy will recover in the latter half of this fiscal year after an expected third straight quarter of contraction in the April-June quarter, a Reuters poll showed.
Reuters