The government left its assessment of the economy in December unchanged from November, with rises in exports and falls in bankruptcies offset by a deterioration in the employment situation.
"The economy is showing an incipient recovery," the Cabinet Office said Thursday in its monthly economic report, using the same phrase as in the November report.
The December report says the economy is expected to "continuously show an upward movement as the U.S. and other economies recover."
It says exports are increasing gradually, with solid growth in exports of digital electronic products, including digital cameras and DVD recorders, to other Asian economies and a slight rise in exports of automobiles to Europe. Exports to the United States were flat.
It gave positive marks to the bankruptcy situation, citing data that the number of bankruptcies across the country fell to 1,114 in November from 1,368 in October.
The report adds that personal consumption remained generally flat and capital spending showed an increase in December, both assessments unchanged from November.
Jun Saito, director for economic assessment and policy analysis in the Cabinet Office, said the economy is moving upward but noted that rising production, improving corporate sentiment and other positive elements were not powerful enough to make the government upgrade its economic assessment in December for a second straight month.
Saito also said the employment situation remains severe, citing data showing the national unemployment rate rose to 5.2 percent in October from 5.1 percent in September.
Despite an upbeat export environment, the report cautions that attention should be given to exchange rate and stock price movements, especially since the yen has climbed against the dollar to three-year highs in recent trading.