Japan's central bank upgraded its view of the economy for the fourth month in a row today as official data confirmed the strength in exports, particularly to Asian countries, that underpins a nascent economic recovery.
"Japan's economy shows signs of stabilising with a distinct increase in exports and a pick-up in production, although domestic private demand remains weak," the Bank of Japan (BOJ) said in its monthly report.
The central bank warned, however, that the pace of the recovery would slow because the economic upturn in Japan's global trading partners is moderating - a reminder that consumption in Japan itself is lacklustre and doing little to push growth.
"The pace of recovery is likely to become somewhat slower in the future...as the effects of overseas restocking dissipate," the report said.
It was the first time since April-July 2000 that the Bank of Japan had upgraded its view on the economy for four consecutive months and comes a day after the central bank decided to keep monetary policy unchanged in order to nurture the recovery.
Fuelled by strong exports of cars and electronic goods, Japan emerged from recession in the January-March quarter, clocking up growth of an annualised 5.7 per cent.
Many economists, like the BOJ, doubt that pace will be maintained. Some predict a "double-dip" recession as the global recovery levels off and a resurgent yen squeezes exporters.