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The Bank of Japan on Wednesday upgraded its economic assessment in May for the third consecutive month, saying the rate of decline has eased.

“The pace of deterioration in Japan’s economy has moderated, with production starting to pick up, reflecting an increase in exports and progress in inventory adjustment,” the central bank said in a monthly report on recent economic and financial developments.

In its previous report for April, the BOJ said, “Japan’s economy still continues to deteriorate as a whole, but the pace has moderated somewhat.”

The latest BOJ report comes after the release Friday of the government’s monthly report, which declared that the economy has bottomed out.

In its report, the BOJ was also more upbeat on the outlook, saying the economy as a whole will eventually stop worsening due to increased exports and improved corporate earnings.

“Overall, Japan’s economy is projected to stop deteriorating as a whole since an increase in exports and production will lead to an improvement in corporate profits and in turn, domestic private demand,” it said.

However, the BOJ noted employment and income conditions are weak, while the pace of increase in exports and production will probably remain modest.

“Therefore, it will take a while for the positive effects . . . to spread across the nonmanufacturing sector, small firms and households,” the BOJ said.

As for exporting conditions, the BOJ said overseas economies, especially in the United States and in East Asia, will probably follow a recovery path. ‘Under these circumstances, exports are projected to continue a moderate recovery,” it said.

With respect to domestic demand, business fixed investment is expected to follow a downtrend for a while, while private consumption is likely to remain lackluster mainly due to worsening employment and income conditions, the BOJ said.

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