The government on Friday upgraded its assessment of the economy in September for the second month in a row, citing increased capital spending and a pickup in exports.

“The economy is showing movements toward incipient recovery,” the Cabinet Office said in its monthly economy report, employing a more upbeat tone than in its August report, when it said the economy “remains roughly flat.”

The report was the latest in a series of signs pointing to an economic upturn. Earlier in the week, data showed the economy in the April-June quarter grew by the largest margin in more than two years.

Economic and fiscal policy minister Heizo Takenaka said the economy, which has long remained flat, was finally entering a new phase.

“I believe the economy is moving off the plateau,” Takenaka said at a news conference. “We will make efforts to see that this seeps into all sectors and that this move becomes sustainable.”

The Cabinet Office attributed the September uptick to stronger capital spending, helped by an increase in exports, including exports to other Asian countries that had declined due to the outbreak of severe acute respiratory syndrome.

The report says the nation’s economy “is expected to show an incipient recovery as the United States and other economies recover at a time of an incipient recovery in the domestic corporate sector.”

But it also warns that attention should be paid to stock prices and long-term interest rates at home and abroad.

A Cabinet Office official said fluctuations in the foreign exchange rate are also an important factor, although this is not explicitly mentioned in the report.

According to the report, exports are “showing incipient recovery,” an upgrade from the previous report, when the office said they were “weakening.”

Corporate profits are continuing to improve, an upgrade from the previous report, which says they were gradually improving.

While the employment situation continues to be severe, evidence of an incipient recovery can be seen, the report says. In the August report, the office said there were signs of an incipient recovery only in some areas.

The report also says the U.S. economic recovery is growing stronger.

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