Japan upgraded its assessment of its economy today after saying strong exports are bolstering output and capital spending and beginning to filter through to chronically weak consumption.
But the yen's recent strength could be a threat to business conditions and warranted close attention, said the monthly report issued by the Cabinet Office.
"The economy is recovering steadily, supported by business investment and exports," it said in an upgrade from the previous report, which cited only an "incipient recovery."
It also said employment conditions were improving and that personal spending, which accounts for more than 55 per cent of all economic activity, was beginning to recover.
Private consumption was showing signs of a pickup, it said. A government official said it was the first time it had used the term "pickup" to describe consumption since September 1999.
Latest figures showed a decline in retail sales in November, but the official said that was likely due to bad weather, and anecdotal evidence suggested consumers spent and travelled more in the winter holidays than in the same period a year earlier.
The upgrade comes as little surprise following a series of healthy economic data showed businesses have entered an expansionary cycle, and the new wording highlights the government's confidence that the recovery will be sustained.