The economy's performance in September was revised upward Friday for the first time in two months as the government saw companies beefing up investment on expectations for the stimulus-driven recovery to accelerate.
The world's third-biggest economy "is on the way to recovery at a moderate pace," the Cabinet Office said in its monthly report, bolstering its opinion of capital spending.
Business investment, which Prime Minister Shinzo Abe sees as a pillar of economic growth, "shows movements of picking up, mainly among nonmanufacturing industries," the report said.
Last month, the government noted the economy is "picking up steadily and shows some movements on the way to recovery." It acknowledged Japan's nearly two decades of deflation is on the verge of ending, buoyed by Abe's program of drastic monetary easing, traditional fiscal spending and promises of structural reform to promote growth.
A Cabinet Office official said the economy "has shown signs of moving toward a self-sustaining recovery," as improving corporate profits make companies more willing to boost production and investment, which could help bolster the broader economy further.
As for prices, the report said, "Recent price developments indicate that the deflation is ending," using the same expression as in August, but added that consumer prices have seemingly become firm.
The government, meanwhile, lowered its assessments of private consumption and exports for the first time in five months and three months, respectively, because they are leveling off from the sharp "recovery" staged in the past several months.
Nevertheless, the government adopted an optimistic outlook.
"The recovery is expected to take hold as household income and business investment continue to be on upward trends, while exports pick up and the effects of the policies develop," the report said.