Japanese Prime Minister Junichiro Koizumi said the country's domestic economy has recovered following three recessions in the past 12 years.
This is the first time he has made such an assessment since taking office in 2001.
"An improvement in company earnings, rising capital expenditures and other measures are showing that the Japanese economy has recovered," Koizumi said, according to the text of an embargoed speech.
The speech was set to be delivered at the opening session of the Diet, Japan's parliament.
The Cabinet Office said last week nominal economic growth will reach at least 2 percent as early as the fiscal year starting April 2006. The government forecasts real growth, or economic activity adjusted for price changes, of 2 percent this fiscal year and 1.8 percent in the year starting April 1, which would mark a third straight year of expansion.
Koizumi, who retained office for his Liberal Democratic Party-led coalition in November, must face voters again at this July's Upper House election.
While the Japanese economy recorded growth for the sixth straight quarter through the third quarter of last year, it still has not snapped more than five years of deflation and lower unemployment from near-record levels.
"Through cooperation with the Bank of Japan we aim to beat deflation and stimulate the economy," Koizumi said, according to a copy of the speech.
Koizumi said last week his government will need another year to end deflation.
He predicted that prices in Japan will start to rise consistently in the year starting April next year.
The yen's 10 percent rise against the US dollar over the past six months is raising doubts about the sustainability of Japan's newest attempt at recovery.
The recovery has relied on an increase in exports to countries such as China and the US.
A rise in the yen against the dollar reduces the value of exporters' profits when repatriated into Japanese currency, which contributes to deflation.
The Japanese currency traded at ?106.55 to the dollar as of 1pm in Tokyo.
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