TOKYO The Bank of Japan (BOJ) upgraded its assessment of the economy Friday for the second straight month as exports began to rise and factory production stopped sliding.

But private demand remained weak, hurt by high unemployment and lower wages as companies cut costs and slashed investment to survive a deep recession.

"Japan's economy still continues to deteriorate as a whole, but the pace has moderated somewhat," the central bank said in its monthly report for April.

"Net exports are gradually starting to increase while overseas economies are clearly gaining momentum for recovery," it said.

Signs a decline in exports was bottoming and stockpiles were being reduced prompted the boj to upgrade its assessment in March for the first time in 20 months, AFP reported.

But the BOJ warned again in april that business investment continued to decline and private consumption remained weak, with other negative factors including sluggish housing investment and lower public investment.

However, the overall tone was more upbeat in April as the effects of a pick-up in external demand began to filter through the economy.

"Final demand overall is still weak, but exports -- which have a large impact on production -- are starting to turn up," it said.

All industries continued to make progress with reducing stockpiles, which mounted during last year's deep slump in demand.

"RAflecting these developments, industrial production appears to have stopped declining and also, the deterioration in business sentiment of firms, mainly in manufacturing, has almost ceased."

Most technology-related production would reap the benefits of a cyclical global rebound, the BOJ said.

"Overseas economies, mainly in the U.S. and East Asia, are likely to follow a recovery path ... under these circumstances, exports are expected to pick up moderately for the time being."

Investment by firms would remain flat in the short term, the bank said in a more positive tone than last month when it said capital expenditure was still weakening.

However, it warned of uncertainties in the global recovery and highlighted the prolonged slump in private demand in Japan, saying some time was needed before the overall economy stopped declining.

On Thursday, the BOJ decided to leave its ultra-loose monetary policy unchanged and analysts said the monthly report indicated there was little chance of the Central Bank adopting a different stance in the short-term.

"The (BOJ) remains bearish on inflation given the weakness of private demand, while also staying cautious on corporate financing conditions," said JP Morgan analyst Ryo Hino. "This suggests there will be no change in monetary policy in the near future."

The BOJ upgrade came two days after the government also raised its assessment of the world's second largest economy for the second straight month, citing similar hopes for a cyclical recovery led by exports.

Analysts said tokyo may use the more optimistic mood as an excuse to delay the introduction of additional measures promised earlier to halt persistent deflation, analysts said.

"Also if the BOJ started to rethink its easy monetary policy, the economy would face another tough time," said Yasuaki Kudamatsu, economist at the Tsubasa Research Institute.

Data released Friday showed the damage done by the long downturn, with corporate failures caused by weak economic conditions in the year to march hitting a record high of 15,280 bankruptcies.

Overall corporate bankruptcies rose 5.9 percent in the year to March to 20,052, the second worst total since World War II, Teikoku Databank Ltd. said.