The government on Wednesday upgraded its assessment of the nation's economy for the second month in a row, following a similar assessment made Tuesday by the Bank of Japan. Economic and Fiscal Policy Minister Kaoru Yosano, who doubles as finance minister, even went as far to say, "It is strongly estimated that the economy clearly hit bottom in the January-March period."

While this is good news, one should not rule out the possibility that his declaration merely sums up the political calculations of the ruling coalition ahead of the next Lower House election.

In its monthly report, the Cabinet Office noted that signs of improvement were seen in exports, especially to China and other Asian countries. It said China's economic stimulus measures and progress in inventory adjustment worldwide will likely buoy Japanese exports.

Industrial production rose for the second consecutive month. In April, it grew a seasonally adjusted 5.9 percent from March — the second-highest growth on record. The Cabinet Office also mentioned the favorable effect of the government's stimulus measures, including tax cuts for the purchase of eco-friendly cars and electronic appliances. However, it reported that capital spending for all industries in the January-March quarter fell 25.3 percent from a year before, and housing starts in April were down 32.4 percent on the year.

As for consumer spending, which accounts for about 60 percent of gross domestic product, the Cabinet Office said it is "weak but there are some signs that its decline will end." Attention should be paid to Bank of Japan Gov. Masaaki Shirakawa's statement that he is carefully watching indicators of final demand, such as consumer spending. His stance is reasonable because the total amount of employee bonuses due to be paid out this summer is expected to decrease substantially.

Another worrying point is the employment situation. The unemployment rate rose by 0.2 percentage point from March to 5.0 percent in April, the highest level since 2003. The government should not lower its guard against a deterioration of the economy. Both the government and the corporate sector need to pursue efforts to increase domestic demand and create jobs.