TOKYO Japan's economy is poised for a cyclical recovery powered by exports, but the strength of the rebound depends on global economic growth and the behavior of financial markets, economists say.

Fresh demand for electronics -- a sector representing 20 percent of Japanese industry -- has sparked new activity in factories around the recession-weary country.

But exports, which account for 10 percent of Japan's gross domestic product (GDP), are the only motor driving its recovery chances. The other engine of growth, private consumption comprising nearly 60 percent of GDP, remains flat, AFP quoted economists as saying.

"Overall, Japan's economy is projected to stop deteriorating as a whole since an increase in exports and production will lead to an improvement in corporate profits and in turn, domestic private demand," the Bank of Japan said last Wednesday, using unusually optimistic terms.

It subsequently upgraded a key economic report for may for the third straight month.

The government did the same with its monthly economic assessment on May 17, announcing the world's second largest economy had stopped deteriorating thanks to a revival in its exporting strength.

Japanese exports rose in April for the first time in 13 months, powered by an awakening of demand from across the rest of the world.

"The Japanese economy is in the process of a marked turnaround," with industrial production seen increasing over the first quarter to March on "a resurgence in the electronics sector," said Jean-Pascal Rolandez, head of Japanese equity research at BNP Paribas in Tokyo.

Every month, the French bank monitors the order books of a wide range of small Japanese electronics firms, said Rolandez. It has noticed that a slump in business activity began to ease last October and returned to two-digit growth this April "signalling a clear rebound in the cycle," he said.

The orders came largely from factories in Asia and the United States belonging to major Japanese companies.

"We can safely say that, at least as far as the manufacturing industry is concerned, activity recovered," said Masaaki Kanno, head of economic and policy research at JP Morgan Chase.

"(But) the question still remains whether the impact coming from exports is now spreading to the non-manufacturing industry," he said.

Japan is experiencing its fourth cyclical rebound since the nation's speculative bubble economy burst in 1990, with around three years between each peak or each truff, economists said.

Recent data documents the latest signs of revival, with the all-industries index of production activity -- seen by some as a more viable representation of economic strength than GDP -- rising 1.2 percent in March from the previous month and 0.6 percent over the first quarter.

Private consumption and capital expenditure should stir in the next three months but the recovery of internal demand will be "very mild and modest," estimated Kanno.

He, like his counterpart Richard Jerram from ING Barings, forecasts the Japanese economy grew 1.1 percent in the three months to March from the previous quarter. January-March GDP is due out June 7.

But Japan's economy -- the most cyclical among all members of the Organization for Economic Cooperation and Development -- is also highly influenced by global cycles, said Kanno.

Monetary and budgetary policy are limited because interest rates are effectively at zero and fiscal spending has been capped by Prime Minister Junichiro Koizumi as part of a reform drive to reign in government debt.

A recent sharp rise in the yen against the dollar -- which threatens to blunt exporters' competitiveness abroad -- has added an extra element of danger to Japan's long-awaited rebound.

The dollar lost more than four percent in value against the Japanese unit in the week to may 15, prompting the Finance Ministry to intervene twice in the foreign exchange market to weaken the yen.

The greenback was quoted at 125.02-05 yen late Friday up from a low of 123.50 marked on Wednesday.

"The economy has bottomed out from a cyclical point of view but we believe the strength of the recovery is not strong, despite the recent assessment," state Minister for Economic and Fiscal Policy Heizo Takenaka admitted Thursday.

"If the dollar continues to fall, (the revival) is going to be very very weak," added Ron Bevacqua, chief economist of Commerz Securities Japan.