The economy has been recovering moderately, the government said Monday in retaining its assessment for the third straight month in August.
Buoyed by the effects of an extra budget for fiscal 2016, the government upgraded its evaluation of public investment, which is now viewed as increasing, a change from "getting firmer" in the previous report for July.
"The Japanese economy is on a moderate recovery," the Cabinet Office said.
The assessment will boost expectations that the current expansion phase from December 2012 will continue and surpass the 57-month Izanagi boom between 1965 and 1970, the second-longest growth run in postwar Japan.
The economy grew an annualized real 4.0 percent in the April to June quarter, the fastest pace in two years, thanks to solid consumer and corporate spending as well as increased public investment.
Private consumption, accounting for nearly 60 percent of Japan's gross domestic product, is "picking up moderately," while both business investment and exports are "picking up," according to the monthly report.
Still, many economists remain skeptical about the sustainability of the robust growth seen in the previous quarter, especially in consumption as wage growth still lacks strength.
In recent weeks, uncertainty has grown abroad, including over the prospects for the administration of U.S. President Donald Trump and geopolitical risks stemming from North Korea's nuclear and missile development.
"Attention should be given to uncertainty in overseas economies and the effects of fluctuations in financial and capital markets," the report said.