TOKYO (AFX-ASIA) - The Cabinet Office upgraded its assessment of the economy in March for the first time since June 2000, saying exports are bottoming out and industrial production is also showing signs of reaching a trough. However, the office said it has not changed the outlook for the economy, arguing downward risks remain due to the severe climate for employment and household income, as well as sharp falls in corporate profit. "The Japanese economy is showing signs of bottoming out in some areas, although the economy continues to be in a difficult situation," the office said. Last month, it said the economy is "continuing to deteriorate." The office upgraded the March assessment for private consumption from "weakening" to "flat". It also upgraded its assessment for exports and imports, as well as industrial production and wholesale prices, while it downgraded the assessment for corporate capital investment and left employment unchanged. "Private consumption is flat, exports are bottoming out and industrial production is also showing signs of bottoming out," it said. The previous assessment said exports are "showing signs of bottoming out", while the imports assessment was upgraded to "flat" from "moderate decline". A Cabinet Office official said improving conditions in the information technology sector have been spreading to other areas, allowing the office to raise its overall output assessment. "Production in March is showing signs of bottoming out, a contrast with the previous month that was reported as a moderate decline, because the improvement in IT-related production has spread to other industrial areas," he said. The official also attributed the move to "progress in inventory adjustment and the narrower decline in exports". The Cabinet Office upgraded its assessment of the inventory ratio to "declining" from "high levels". The improvement in inventories also helped the view of wholesale prices, which was upgraded to "narrower decline" from "falling". "Wholesale prices data in February showed a narrower decline on improved electrical-product prices, helped by inventory adjustments, as well as international oil, coal and non-ferrous metals prices," the official said. On the otherhand, the employment assessment was left unchanged. "Business investment is declining significantly. The employment situation has become increasingly severe, with the unemployment rate at a high level," the Cabinet Office said. The wording on the economic outlook was altered but the overall assessment was unchanged. "The Cabinet Office hopes improvement in the external economic situation and progress in domestic inventory adjustments will underpin the economy (in the future)," the office said. Last month, it noted that some signs of improvement in the US and some Asian countries may help the Japanese economy. "We are not optimistic about the outlook because there is a downward risk from the ongoing severe situation in employment and household income," the official said. The Cabinet Office omitted the previous phrase on concerns over "negative factors in the development of the financial markets", but replaced it with "the development of corporate profits". The official cited the Ministry of Finance's recently announced survey that showed parent-level pretax profit of non-financial companies in the fourth quarter falling by 31.4 pct year-on-year. He added that, regardless, the office needs "to continue closely watching the financial markets."