Wages and labour conditions are improving, the government said while warning of uncertainties in the global economy plus fluctuations in financial and capital markets.
"The economy is on a moderate recovery, while delays in improvement can be seen in some parts," the Cabinet Office said its monthly economic report released on Monday.
The government maintained the view taken last month, when it upgraded its economic assessment for the first time since March 2015.
On all topics assessed - which include household spending, exports and business sentiment - the government kept its view from December. Consumers' mindsets are improving and exports to Asia are recovering, the report said, using the same expressions as last month.
Japanese manufacturers' morale rose for a fifth straight month in January to a 2-1/2 year high and the service sector's mood jumped to its highest levels since mid-2015, a Reuters poll showed, thanks to a weak yen and buoyant share prices.
Japan's core consumer prices were expected to slow their rate of decline in December and exports were seen to have risen for the first time in 15 months, a Reuters poll showed, a positive sign for the economy.
The Bank of Japan last month held off on expanding stimulus, underscoring a market view that it will stand pat unless a severe external shock threatens to derail economic recovery. The central bank holds its next rate review on Jan. 30-31.
(Reporting by Minami Funakoshi; Editing by Richard Borsuk)
