TOKYO (AFX-ASIA) - The Cabinet Office said it maintained its assessment of the Japanese economy for December, saying the economy continues to "deteriorate", but added that it upgraded its exports estimate. Last month, the office said the economy was "deteriorating further" but the removal of the word "further" does not signal an upgrade. The office also left unchanged its assessment of the outlook for the economy, though adding that the effects from the Sept 11 attacks are weakening. "There are still concerns over the US and European economies but the magnitude has fallen as the US stockmarket has rebounded with military activity in Afghanistan coming to an end," Cabinet office economist Haruhito Arai said. "However, we cannot say the concerns have disappeared, considering the recent turbulence in the Middle East," he added. The Cabinet Office upgraded its assessment of exports, describing them as "declining", from "sharply declining" last month, and citing brisk shipments of cars and steel to the US. "Car firms are conducting zero interest-rate campaigns in the US. Demand for Japanese cars is doing well in that environment and makers are increasing their shipments to the US," Arai told reporters. "Steelmakers are also increasing their shipments ahead of the imposition of US sanctions on imports of steel products from Japan from February next year." However, Arai noted that the outlook depends on economic developments overseas and so remains uncertain. "We had expected Japanese exports to drop sharply in November due to the September 11 terrorist attacks on the US but the strong exports of cars more than offset the fallout from the attacks," he said. "The decline in exports to other Asian countries also seemed to have hit a bottom as the falling trend in exports of semiconductors and other electronic equipment eased," he said. "But it is unclear whether this positive sign will continue. We need to watch future economic developments in Asia and the US." The Cabinet Office downgraded its assessment of corporate earnings this month, saying profits have been "falling substantially", compared with last month's statement that they were simply "falling". "The manufacturing sector, especially electronic machinery companies, are seeing a drastic decline in profits," Arai said. The office also downgraded its assessment of wholesale price movements, saying Japan's the decline is "accelerating moderately". It reaffirmed the assessment of private consumption for a second month, along with employment and business sentiment, saying consumption is "weakening". "The employment situation has become increasingly severe with the unemployment rate rising to a new record of 5.4 pct, while companies' assessment of business conditions has deteriorated further," Arai said.