Economic Planning Agency on Tuesday upgraded its assessment of the economy for the second consecutive month and said it is gradually approaching a self-sustaining recovery.

“The economy, which has been supported by public demand, shows growing signs of achieving an autonomous recovery,” the EPA said in its monthly report for June. Economic activity “continues to improve moderately,” it said, repeating a phrase it used in May.

Missing from the report was its statement that aggregate demand remains weak, a line it has been using for its economic assessments from March to May. EPA chief Taichi Sakaiya, however, said it is too early to say the economy is on solid footing.

“From a long-term view, the economy is recovering. It hit a trough in April last year and is now on an upward path,” Sakaiya told reporters. “But it has yet to achieve a self-sustaining recovery.”

Takashi Omori, a senior official at the agency’s Research Bureau, echoed Sakaiya’s words. He said the assessment for June was upgraded to reflect the increase in corporate capital spending and rising incomes. He also said an increase in overtime hours and rising corporate profits were contributing factors.

“The recovery in investment in plant and equipment has become evident,” the report said, adding that capital spending is likely to grow further. The agency raised its assessment of corporate performance, saying, “Corporate profits have markedly improved.”

As for personal consumption, however, the agency was only slightly optimistic, pointing out that it “remains flat, while the decreasing-income trend is coming to an end.”

Despite the overall brighter assessment, the agency again warned that the economy is still in dire straits because unemployment remains high, although overtime and job offers are rising.

Meanwhile, the agency took note of the huge extraordinary losses many firms reported in settling their fiscal 1999 accounts in March. The losses were partly due to companies’ efforts to cut loose unprofitable businesses and dispose latent losses on real estate holdings, Omori said.

Excluding those in financial services, the 1,274 firms listed on the first section of the Tokyo Stock Exchange that closed their books on March 31 reported 13.64 trillion yen in unconsolidated extraordinary losses, the agency said.

Spending rise seen

Improved corporate earnings and an apparent leveling off of the unemployment rate may boost household spending between fall and the end of the year, Finance Minister Kiichi Miyazawa said Tuesday.

“If that is the case, I think (public spending) will probably relinquish its economy-leading role to the private sector,” Miyazawa said in a regular news conference after the release of the Economic Planning Agency’s monthly report for June.

Advancements in information technology appear to be having some positive effects on the economy, he said.