The government equivocated Tuesday in its August economic report on whether deflation has ended, although for the second month in a row it did not mention the "D" word.

The monthly government economic report, released by the Cabinet Office, maintains a bullish view on the economy for the sixth straight month, saying, "The economy is recovering." The same phrase has been used since February.

Commenting on the report, a Cabinet Office official said the economy is "not in a state of deflation, but has not fully overcome it either," adding that "price trends are flat."

He said the assessment is unchanged from July, when the report dropped the word "deflation" for the first time since March 2001.

The official noted that the CPI has been hovering around zero, even though the year-on-year change in the core consumer price index, which excludes perishables, has been rising since November, excluding energy costs and other special factors. The index registered a 0.2 percent year-on-year increase in June.

The official said the government needs to examine other data, including the supply-demand gap, before officially announcing an end to deflation.

In other respects, August's report was unchanged from the previous month.

The August report says capital investment is rising and private consumption is "increasing moderately."

"The employment situation is improving more broadly, although some severe aspects remain," it says, adding that exports and industrial production are "increasing moderately."

The official noted exports to the United States fell in June, dragged down by lower shipments of vehicles and construction equipment.

The report warns that a possible slowdown in U.S. economic growth may affect Japanese export trends.

The August report also warns that the sustained rise in oil prices is likely to hurt the Japanese economy.