TOKYO (Kyodo) -- The government on Friday retained its view that the Japanese economy is recovering but warned that corporate profits are only improving at a moderate pace due to a temporary appreciation of the yen and rising labor costs.

In its monthly economic report for December, the Cabinet Office said the economy is "recovering at a moderate pace, although it remains pausing in part," using the same expression for its overall assessment for the fifth straight month.

The Cabinet Office made no changes to its evaluations of key components of the economy except one for corporate profits, which was revised downward for the first time since March 2023.

The report maintained its assessment of corporate earnings, saying they are "improving as a whole," but added that "the pace has become moderate."

Citing a Finance Ministry survey on business activities for the July-September quarter released in early December, a government official said the yen's historic weakness against the U.S. dollar took a breather during the period, hurting domestic exporters' overseas profits.

The yen gained strength against the dollar during the third quarter of 2024. At the end of September, the dollar traded at 142.38 yen, 6.39 yen weaker from a year earlier, according to the ministry.

Weakness, however, has returned to the Japanese currency, which was trading in the upper 156 range late Friday afternoon.

Profits of small- and mid-sized businesses were also weighed down by rising material costs and salaries for their workers, according to the official.

The latest report maintained the assessment of the global economy for the sixth consecutive month, saying it is picking up despite signs of pause in some areas.