The government said Wednesday the economy remains on a recovery track, but it cautioned against a possible adverse impact from fluctuations in the foreign-exchange and stock markets, as well as turbulence in the global economy.

“The economy is showing movements toward incipient recovery,” the Cabinet Office said in its monthly economic assessment for October, citing increased capital spending and corporate profits. The same phrase was used in the September report.

To support the recovery trend, “the government should do what it can to make good signs appear in every component of the economy, particularly in regional economies and employment,” Heizo Takenaka, state minister in charge of financial, economic and fiscal policy, told a news conference.

The government also needs to make sure that structural reform will move forward by tackling priority issues — reforms of the pension system, postal services and the local taxation system, Takenaka said.

But the latest report contains caution about exports due to the recent steep rise in the yen against the dollar, saying only that “exports are retaining a recovery trend.” Last month, the report said “exports are improving.”

On the positive side were exports to other parts of Asia, which recovered from a brief downturn stemming from the outbreak of severe acute respiratory syndrome, according to a senior Cabinet Office official.

Exports to Asia account for 40 percent of Japan’s overall exports.

However, the export situation has become volatile. The dollar tumbled more than 7 yen in September, briefly falling below 111 yen at the end of the month. The U.S. currency dropped even lower this month.

The yen’s surge reduces exporters’ profits in dollars when they are repatriated to Japan.

The October report says, “attention should be given to the development of stock prices and exchange rates as well as to those of the global economy.”

In the September report, the government’s concern centered on long-term interest rates rather than currency rates.

The somewhat prudent assessment in the October report follows the Bank of Japan’s decision Friday to further loosen the reins on its easy monetary stance to nurture the nascent recovery.

Turning to other areas of the economy, the October assessment says personal spending is generally flat.

Consumer sentiment is improving, with sales of digital devices such as DVDs and digital cameras increasing. But uncertainties over salaries kept sentiment from brightening further.

The unusually cool summer had a deleterious effect on sales — for instance at department stores — but the impact was limited, the report says.

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