Japan should emphasize developing its IT infrastructure to allow for sustainable growth and only embark on fiscal reconstruction after ensuring an economic recovery, the Economic Planning Agency said in its annual report released Friday.

The agency said the government should tackle debt reduction by making governmental expenditure more efficient only after it is certain that a full-fledged recovery is in place.

While the economy started gradually improving in spring 1999, it is "still in the process" of achieving a self-sustaining recovery, with consumer spending in particular still weak in June, it said.