TOKYO (Reuters – Japan’s government upgraded their view of the economy in April, as authorities became more optimistic about private consumption prospects following the expiration of COVID-19 curbs.

Private sector analysts however believe that the future outlook remains clouded by uncertainty, including an inexorable rise in energy and raw material prices which may further delay recovery of the third largest economy after the pandemic.

The government stated that “the economy seems to be picking up” as COVID-19’s severe condition is improving. It also removed a March reference to “some weakness in recovery”.

The improvement in the overall assessment of private consumption was mostly due to the brighter outlook. This also represented the first update since December.

A government official said that credit card spending data revealed a rise in restaurant, travel, and hotel consumption towards the end of March. This was before Prime Minister Fumio Kirshida approved the report.

However, consumer sentiment has been impacted by rising food and energy prices, as Japan begins an annual holiday week at the beginning of May.

According to the official, “The likelihood of a revenge-spending’ bubble is decreasing faster than we expected.” The uncertainty around Ukraine and COVID-19 keeps households from spending more.

Inflationary pressures for domestic-focused businesses and consumers have increased due to the recent weakness of the yen at 20-year lows.

According to the government’s April risk assessment, “financial & capital market volatilities” were listed as one of several downside risks for the economy. This is the same description that was used in the last month.

Official said that the note included currency movements, but that the government had not yet confirmed data on the effect of the latest weakening yen on economic fundamentals.

Based on solid data about public works contracts, government officials also increased their assessment of public investments for the first-time since July 2020.