Japan government reiterates its view the economy is recovering 'gradually'

TOKYO (Reuters) - The Japanese government left unchanged its assessment that the economy is gradually recovering, suggesting a recent growth streak is likely to continue thanks to improving domestic demand.

"Japan's economy is gradually recovering," the Cabinet Office said in its monthly economic report on Wednesday. That was unchanged from January, when it upgraded the outlook for the first time in seven months.

The government left unchanged its assessment that consumer spending is "recovering" as spending on flat-panel TVs, home electronics, and dining out remains firm.

The economy has grown for eight straight quarters, the longest continuous expansion since a 12-quarter stretch between April-June 1986 and January-March 1989 around the height of Japan's notorious economic bubble.

Steady growth increases the chance that the government will be able to declare an end to deflation, which would amount to a declaration of victory for Prime Minister Shinzo Abe's ambitious campaign to reflate the economy.

In the monthly economic report, the Cabinet Office stuck with its view that industrial output and capital expenditure are gradually expanding.

The Cabinet Office also left unchanged its assessment that the labour market is clearly improving, as labour demand is the strongest in more than four decades.

However, an improving labour market has been slow to push up the inflation rate, showing how difficult it is to completely rule out a return to deflation.

Abe took office in late 2012 with a bold plan to shake off 15 years of deflation and sub-par growth.

In the past few years, Abe's labour reforms, corporate tax breaks and changes to other regulations have started to bear fruit.

Stock prices are close to their highest in 26 years, corporate profits are near an all-time high, business investment is rising and exports are growing.

(Reporting by Stanley White; Editing by Richard Borsuk)