The economy is showing signs of nearing a sustainable recovery course for the first time since the recession began in April 1997, the Economic Planning Agency said Friday in its monthly report for March.

It is the first time in five months that the agency has upgraded its monthly assessment. In October it began reporting that the economy "continues to improve moderately."

The EPA used the same phrasing in its March report, but added, "Moves toward a sustainable recovery have gradually appeared, including a more positive note in corporate activities."

EPA chief Taichi Sakaiya said moves toward an economic recovery course are spreading.

"But we cannot declare an economic recovery until the economy clearly shows continued moves toward a recovery," he reckoned at a news conference.

Takashi Omori, a senior official at the agency's Research Bureau, said the economy will appear to reflect a pickup around May, bolstered by public spending and foreign demand, especially in Asia.

"Although the pace of improvement has not changed, the economy has reached a certain stage in its recovery path," he said.

The government, however, has yet to declare that the recovery has become sustainable, as personal consumption remains at a standstill and unemployment is still high, Omori added.

Chief Cabinet Secretary Mikio Aoki said that the government is not yet ready to declare that the economy is on a sustainable recovery path, because of sluggish growth in domestic demand.

"The recovery in demand is still weak, so we are not at the point at which we can declare an economic recovery," the top government spokesman told reporters.

The EPA's Omori said the upbeat note in the March assessment was attributed to a pickup in capital investment, improvement in corporate earnings and the removal of inventory burdens.

The EPA clearly upgraded its assessment on factors related to corporate activities in the reporting month, while also slightly upgrading its assessment of personal consumption.

"Personal consumption rallied compared with year's end," when low bonuses weighed on household spending, "but improvement has not become a trend because of low incomes," the report says.

An increase in household income is required for personal consumption to pick up steadily and lead the entire economy to a sustainable recovery path, the official said.

Omori said he expects the increases seen in overtime hours and job offers to lead to higher wages, but the recent annual spring wage talks in major industries ended for the most part marking record-low raises.

Private-sector analysts expressed mixed views on the EPA's latest assessment of the economic situation.

Ryutaro Kono, chief economist at Dai-Ichi Life Research Institute, said he agrees with the EPA's assessment that moves toward a sustainable economic recovery course are gradually appearing.

"The household sector remains sluggish, but capital spending and other activities by the corporate sector began recovering in the second half of fiscal 1999," Kono said.

Hajime Kitano, a strategist at Tokyo-Mitsubishi Securities Co., however, cast doubt on the EPA's assessment.

"If there are moves toward a recovery path, the Bank of Japan should consider changing its zero interest rate policy," Kitano said. "Nobody pays attention to the report because the government is extolling recovery in the economy with words only.

"Naturally the government will face criticism that this positive assessment was made with this year's general election in mind."