The Bank of Japan raised its assessment of the economy Tuesday, citing improved prospects for exports on the back of growth in the United States, issuing the latest in a series of uplifting signs for the troubled economy.
The September report marks the first upgrade by the central bank since July. Last week, in a separate report, the Cabinet Office also upgraded its view of the economy.
"Economic activity still continues to be virtually flat as a whole although signs of improvement have been observed in such areas as the environment for exports," the BOJ report says.
In its August report, the bank said economic activity remained virtually flat.
The BOJ warned about continued deflation, a situation in which falling prices bring down profits and economic activity.
The central bank has maintained an easy monetary policy and voted Friday to keep that policy of flooding the banking system with extra cash to encourage lending and financial stability.
The BOJ said economies in the United States and Asia were expected to grow at a faster pace, lifting Japanese exports and giving recovery here a boost despite weak consumption at home.