The government retained on Thursday its assessment of the economy because it is recovering moderately despite recent weakness. However, it slashed its view on corporate sentiment amid a firming yen and the slowdown in China.
But it warned about the impact of the powerful earthquakes that struck southwestern Japan last week, saying the government needs to give "full attention" to the disaster's economic impact.
The world's third-largest economy is "on a moderate recovery, while weakness can be seen recently," the Cabinet Office said in its monthly report, after downgrading its assessment in March.
The Cabinet Office cut its view on corporate sentiment for the second straight month after the Bank of Japan's tankan survey showed that corporate sentiment worsened in March from three months earlier.
But it maintained its overall assessment, citing continued improvement in employment and income, as well as solid corporate profits.
Meanwhile, private consumption has remained sluggish, with the government describing it as "almost flat, while consumer confidence appears to be pausing," after downgrading its view the previous month.