Japan's graying society will require more investment in technologies such as artificial intelligence and robots to make up for a decline in the labor force and its effect on economic growth, according to a government report released Friday.

The world's third-largest economy is on a firm footing, the white paper said, having enjoyed a moderate recovery for the past five and a half years under Prime Minister Shinzo Abe's policies, including aggressive monetary easing by the Bank of Japan.

"Corporate profits are at record highs, labor and income conditions are improving, and increased income is leading to an expansion in consumption and investment, showing that a 'virtuous economic cycle' is beginning to take hold," said the annual white paper on economy and fiscal policy.