The government Wednesday raised its assessment of the economy for the first time in 11 months, citing a pickup in personal spending and improvement in jobs.
"The economy is recovering at a moderate pace, while some signs are seen of coming out of a weak situation," the Cabinet Office said in its monthly report for June.
The wording compares with the May report, which said, "The economy is recovering at a moderate pace, while some weak movements continue to be seen."
The more upbeat description for June suggests the economy may exit from a pause in recovery.
Economic and fiscal policy minister Heizo Takenaka said he had not changed his view that the economy will pick up again by midyear.
"Basically, we are moving in that direction," Takenaka told a news conference.
"Personal spending is picking up and the employment situation is improving on a broader basis, though some severe aspects remain," the June report says.
At the same time, however, it indicates the recovery is still in a resting state. "Exports are flat and industrial production is leveling off," it says.
Exports to Asia and Europe are weakening, according to the report.
Takenaka said the government will closely monitor the figures for personal spending, exports and production, which he said are the three key factors in determining whether economic recovery can begin.
The report says corporate profits are "improving" and capital investment is "increasing moderately" -- the same wording in the May report.