The government on Monday kept its basic opinion of the economy unchanged for June but upgraded its view on capital spending as companies moved to increase investment.

"The Japanese economy is on a moderate recovery," the Cabinet Office repeated in its latest monthly economic report, rehashing its view since March.

Business investment, however, was described as "picking up recently" after the Finance Ministry said capital spending expanded 5.8 percent in the January-March quarter, the report said. Last month, business investment was described as "flat."

But the size of the upward revision was modest, reflecting a cautious stance based on its projection for lower machinery orders in April-June, a Cabinet Office official said.

Despite the first capital investment surge in six months, the government kept its view unchanged because production has slowed to some extent and the recovery in personal consumption remains patchy.

"The situation doesn't allow us to upgrade the overall economic assessment as exports and production appear to be slowing down in the corporate sector," the official said.

Keeping its exports and output assessments intact, the government described exports as "almost flat" and industrial production as "picking up, while weakness can be seen in some areas."

It also maintained its view on personal consumption, despite upgrading it in May, by recycling the phrase "showing signs of picking up."

Sales of some appliances and automobiles grew in May, but consumer confidence indicators have declined slightly in recent months.

Looking ahead, the government said the economy is expected to recover, supported by the effects of the drop in oil prices, but warned that attention should be given to the downside risks, including the slowing of overseas economies.

On consumer prices, the government said they are "rising moderately," reflecting hikes in food and food services, such as at restaurants, the official said.