TOKYO, Dec 18 - Japan's government believes the economy is starting to recover as exports increase, but stopped short of declaring a full rebound in its December monthly report, citing tougher employment conditions and a slowdown in imports. The report's headline phrase -- which sums up the government's assessment -- said the economy "is showing an incipient recovery," the same wording it used in November. The report, released on Thursday, is based on economic indicators. While rising exports, improving business investment and a slight recovery in consumer sentiment were positive signs, a decline in the number of people in work and slow imports kept the overall assessment unchanged, the Cabinet Office said. "Looking at production and others, we confirmed this month that things are improving," said Jun Saito, director of economic assessment and policy analysis at the Cabinet Office. "If things continue as they are there could be a change to the assessment." The report is largely in line with recent data showing that Japan's economic recovery is proceeding steadily. Growth is likely to top two percent in the fiscal year ending next March, well above an original government forecast of 0.6 percent. However, there is caution over the sustainability of the rebound, with exporters concerned the recent rise of the yen could hurt their profits, while personal consumption -- the largest part of Japan's economy -- remains slow. The Bank of Japan's quarterly "tankan" survey of corporate sentiment on Friday showed that large companies were at their most confident in six years, though they were cautious about whether the optimism could be sustained.
The Japanese government will probably opt for a conservative forecast for gross domestic product (GDP) growth of 1.8 percent in real terms and 0.5 percent in nominal terms in the fiscal year starting next April, local media said on Wednesday. In the December report the government raised its view of export conditions, noting they were gradually increasing. It left unchanged the view that business investment is picking up, that personal consumption is improving slowly and that production -- especially of electronics goods such as digital cameras -- is recovering. But it saw employment conditions as tougher than in the previous report, noting that the number of people employed has fallen for the past three months, which could affect personal spending. It also saw imports flat in December, instead of rising as it had said in November. Saito said the changes in both employment and import views were probably temporary phenomena. He added the government had seen no effect from the high yen on the economy in December, despite concerns from some Japanese officials that the currency's recent rise to its highest in three years against the U.S. dollar may hurt exporters' profits. On Tuesday the Bank of Japan upgraded its view of the economy in its December report, citing an increase in exports, capital spending and industrial output. The Cabinet Office's Saito said he did not see any difference between the two assessments.//www.reuters.com