The government left unchanged its upbeat economic assessment in April, stating that bright corporate sentiment is extending to wider sectors.
"The economy continues recovering steadily with improvement in the corporate sector spreading," the Cabinet Office said in a monthly report issued Friday.
The March report said, "The economy continues to recover, supported by business investment and exports."
The assessment confirms that the recovery may be spreading beyond large, export-oriented manufacturers to nonmanufacturers and smaller companies, as shown in the Bank of Japan's "tankan" corporate survey released earlier this month.
Optimism over corporate earnings lifted the key Nikkei stock average briefly above the 12,000 line earlier this month, for the first time in 32 months.
"The key word in this report is 'spreading,"' economic and fiscal policy minister Heizo Takenaka told reporters, adding that spreading the improvement in the corporate sector to the household sector remains a major challenge.
Japan's recent economic recovery has been backed by exports amid robust economic growth in China and other parts of Asia.
The April report says exports are rising, but the tone of the assessment retreated slightly from the March report, which said exports are rising "rapidly."
The monthly report also says the job environment remains severe, although "an incipient recovery can be seen".