TOKYO (Reuters) - Japan's government upgraded its view on the overall economy for the first time in eight months on Monday, noting a moderate recovery trend as factory output is picking up on the back of improving corporate activity.
In its monthly economic report, the government also raised its assessment of production, corporate profits and sentiment, encouraged by further signs of an economic recovery from a recession unexpectedly caused by a sales tax hike last April.
However, the government maintained its views of private consumption and capital spending, saying that consumer spending held firm and business expenditures were largely flat, suggesting that a virtuous economic cycle is far from assured.
The report comes a week after the Bank of Japan stuck to its massive stimulus programme and its rosy view of the economy, signalling that the country is on course to emerge from recession without additional monetary easing.
"The economy continues a moderate recovery trend as improvement is seen in the corporate sector," said the Cabinet Office, which compiled the March economic report.
This marked an upgrade from the previous month, when the government said the economy was in a moderate recovery despite weakness seen in private consumption and other areas.
The government expects the economy to be helped by cheaper crude oil prices, which could boost purchasing power at households and lower costs of manufacturing in a resource-poor Japan. However, a government official noted that benefits were slow spreading through to consumers.
"Consumer sentiment, as well as jobs and income conditions, is improving, but that has not much led to private consumption," said a Cabinet Office official, citing bad weather as a reason behind sluggish consumption recently.
"We need to watch the trend carefully."
The Cabinet Office said factory output was picking up, a slight upgrade from February when it was described as showing signs of picking up.
Company profits showed improvement, and the business mood was largely flat although there were some signs of improvement, it added.