The Japanese government on Monday upgraded its assessment of the economy for the first time in two months, as a weak yen helped revive the country's exports and factory output.
"The Japanese economy is picking up slowly," the Cabinet Office said in its May monthly report. This was an upgrade from previous month's assessment when it said that economy was showing "signs of picking up while weakness can be seen in some areas."
Exports are showing signs of picking up and industrial production is slowly gathering pace, today's report said.
The government expects economic recovery to resume gradually, supported by improvement in confidence and export conditions as well as due to the effects of the fiscal and monetary policies.
However, it remained concerned about global economic developments and said slowdown of overseas economies still poses "downside risk."
According to the report, big firms' profits improved while business investment is starting to level off. Firms' opinion on current business conditions is showing signs of improvement. Private consumption is picking up and employment prospects appeared largely positive, according to the Cabinet Office.
The report also found that Japan's economy is in a mild deflationary phase, though "signs of change can be seen in some areas recently."
According to most recent official data, Japan's economy grew at an annual rate of 3.5 percent in the first three months of 2013. This was stronger than a 0.2 percent growth in the fourth quarter of 2012. On a quarterly basis, GDP expanded 0.9 percent.
Other economic indicators from Japan were mostly positive and this adds to evidence that the economic policies introduced by Prime Minister Shinzo Abe, known as "Abenomics," have started to pay off.
The huge fiscal stimulus launched by the Bank of Japan in April was largely aimed at ending deflation, but has contributed to a decline in yen, helping the export sector.
However, the authorities have cautioned against excessive fall in the currency. Japan's Economy Minister Akira Amari expressed concern over the continued decline in yen during an interview to broadcaster NHK on Sunday. He warned that a further slide in the currency may have a "negative impact" on people's livelihood.
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