Japan govt keeps economic view but flags overseas risks
It also called on the Bank of Japan to watch the impact overseas monetary policies have on financial markets and "to take bold and appropriate policy steps to support the economy".
Financial markets focus this week on the U.S. Federal Reserve's policy meeting on Sept. 20-21 and any further loosening of its policy could weaken the dollar and lead to a renewed spike in the yen.
"The Japanese economy is picking up while difficulties continue to prevail due to the earthquake," the government said in its monthly report, maintaining the language from the previous month.
It also repeated that industrial production and exports were picking up, despite recent signs of a slowdown.
"Some sectors such as electronic devices have already shown weakening of output due to the impact from the global economy, but overall, recovery is continuing," said Shigeru Sugihara, director of macroeconomic analysis at the Cabinet Office.
He said transportation sector firms, chiefly automakers, are likely to lead the recovery as they plan to raise output in October and November.
The government was more direct than before in its appeal for central bank help, given the impact U.S. monetary policy and Europe's sovereign debt crisis were having on financial markets, another official said.
In August, the government called on the BOJ to take appropriate and flexible steps to support the economy.
"Should overseas economies that are seeing weak recovery fare more poorly than expected and currency and stock markets show swings, there is a risk the Japanese economy will underperform expectations," the government said.
Japanese authorities intervened in the currency market in August to stem the yen's sharp rise and the BOJ eased monetary policy by boosting asset purchases on the same day.
The central bank kept its policy on hold this month but has expressed its readiness to ease further if its forecast of a moderate economic recovery later this year is threatened.
Japan's economy has emerged from recession as it recovered from the March 11 disaster but growth remains modest, with economists expecting a bigger slowdown in the final months of the year than previously thought, a poll has shown.