Japan's government on Friday raised its economic assessment for the first time in nine months.

"The Japanese economy is on the way to recovery at a moderate pace, reflecting emerging demand for reconstruction, while difficulties continue to prevail," the Cabinet Office said in its monthly report.

Nonetheless, the government sees downside risks stemming from sharp fluctuations in the financial markets, and overseas economic slowdown.

The Cabinet Office lifted the assessment of consumer spending and exports in the May report. Private consumption is increasing at a moderate pace and exports showed signs of picking up, it said.

The government also see improvement in corporate profits. Corporate profits show signs of leveling off, the Cabinet Office said.

Also, the latest report showed that employment situation is picking up, while the government said employment situation remains severe in its April report.

RTTNews