The government on Friday remained relatively upbeat about the economy in its May report but downgraded its views on output and imports following the first consumption tax hike in 17 years.
Emphasizing that the negative impact of the April 1 tax hike is expected to fade soon, Prime Minister Shinzo Abe's team also upgraded its assessment of capital spending, describing it as "increasing" for the first time in about six years.
"The Japanese economy is on a moderate recovery trend, while some weak movements are seen lately due to a reaction after a last-minute rise in demand before a consumption tax increase," the Cabinet Office said in its latest monthly economic report.