Economic and fiscal policy minister Kaoru Yosano spoke confidently about the course of the economy Friday, saying it was about to emerge from "a dark tunnel" and show sustainable growth from now on.

"Given both the real economy and people's sentiment, I would say the Japanese economy is now about to exit a dark tunnel and move in a bright direction," Yosano told a news conference.

"The people's mind-set has changed and (they're) beginning to have confidence in the future," he added.

Yosano said the growth in confidence stems from the fact that many companies have resolved problems with excessive debt, employment and production capacities.

Yosano also downplayed a possible negative economic impact from the government's plan to make a thorough review of expenditures and revenues.

Economic policies under the administration of Prime Minister Junichiro Koizumi have been intended to limit fiscal measures that are thought to create demand, according to Yosano.

"So, even if we further curb state expenditures, it is likely to have little impact on Japanese economic growth," he said.

Meanwhile, Finance Minister Sadakazu Tanigaki chimed in with a cautionary note to remind the public that mild deflation still persists and that spending by consumers and companies has helped the economy expand.

"The economy is steadily recovering led by private domestic demand," Tanigaki told reporters in Tokyo the same day.

"Still, one issue that remains is ending deflation. Mild deflation still persists even though the statistics have been improving."

Trends in oil prices and their effects on the global economy, as well as developments in the U.S. and Chinese economies need to be watched closely, Tanigaki said.