TOKYO, April 6: The Japanese government will upgrade its official comment on the state of the economy when it releases its monthly economic assessment next week, a senior member of the ruling Liberal Democratic Party said on Saturday.

The Cabinet Office’s April report will say the economy has entered a stage to recover moderately, LDP Secretary General Taku Yamasaki told a seminar, Kyodo news agency reported.

Yamasaki said the report, to be released on Wednesday, would include the phrase: Perceptions that the economy is bottoming out have sprung up.

In its March report, the Cabinet Office upgraded its economic assessment for the first time since June 2000, saying that while the economy continues to be in a difficult situation, signs of bottoming out can be seen in some areas.

Until March, the government had used the word “deteriorating” to describe the economy for eight consecutive months.

The more upbeat assessment in the April report will be a rare bit of good news for Prime Minister Junichiro Koizumi, whose popularity has been sliding since January when he sacked his popular but eccentric foreign minister, Makiko Tanaka.

Corruption scandals involving LDP lawmakers have put further pressure on the beleagured prime minister, dragging his support level in one recent poll to just 44 per cent, a far cry from the 80-90 per cent ratings he enjoyed when he took office a year ago.

High public approval ratings have been a driving force behind structural reforms, so we have to take measures to prevent the ratings from skidding further, Yamasaki said.

He said tax incentives and fiscal stimulus measures were possible remedies for Koizumi’s fading fortunes.

Cutting taxes on spending on plant and equipment and reforms on inheritance taxes would be key areas to consider, he said.

The government will outline an overhaul of the tax system in June, including tax incentives to promote investment rather than savings, and other measures to spur the property market.

If necessary, we have only to bring forward the planned implementation of public works projects, Yamasaki said, referring to projects budgeted for the fiscal year that started on April 1.

The upgraded assessment would follow a growing list of economic indicators that suggest the world’s second largest economy may have seen the worst of its latest recession, thanks mainly to a recovery in the United States and the rest of Asia.

The government is forecasting zero growth in gross domestic product for 2002/03 after an expected fall of 1.0 per cent in the fiscal year just ended.—Reuters