TOKYO - A recovery in business and consumer sentiment over the weakening yen and higher stock prices against the backdrop of expectations for "Abenomics" was seen in a monthly report released by the government.
"The most important thing [for economic recovery] is to maintain a steady growth strategy, while the private sector moves ahead with real investment," Akira Amari, state minister for economic revitalization, said at a press conference Tuesday.
The government has hammered out a policy to shore up the economy in the short-term with a package of emergency stimulus projects, which will use 10 trillion yen (S$135.9 billion) from state coffers.
The policy, along with further monetary easing, including a 2 per cent inflation target, is part of Abenomics, which aims to spur growth and pull the economy out of deflation.
The administration plans to put the economy on the recovery track by carrying out the growth strategy, including deregulation, while the current efforts take effect.
The January economic report highlighted what Prime Minister Shinzo Abe's administration has achieved in tackling the economy.
Some private-sector analysts also share the government's optimism over the prospects for the economy.
"Investment and consumption will be active as early as spring and improved sentiment has been seen among both business leaders and consumers," Yoko Takeda, senior economist at the Mitsubishi Research Institute Inc., said.
"The government must steadily carry out its growth strategy so as not to ruin this positive mood," Takeda added.
However, concerns remain, as exports and other indicators are still decreasing. The monthly economic report pointed out that the "slowing down of overseas economies is still a downside risk for the domestic economy."
The US economy is another concern as it may again face a "fiscal cliff," which could result in excessive fiscal restraint, triggering a sharp economic downturn.
Pulling the nation's economy out of its prolonged deflation remains a difficult task. Although the government and the Bank of Japan agreed to introduce the 2 per cent inflation target, the report pointed out "consumer prices, excluding fresh food, petroleum products and other specific components, are expected to continue a moderate decline."