Japan's government left its assessment of the economy unchanged in April, after a rare downgrade in March, saying the US-China trade war remained a threat to exports and economic growth.
The Cabinet Office, which helps coordinate government policy, last month blamed the bruising trade war for the first downgrade of its overall assessment in three years.
In its latest review, the office said the economy remained in a gradual recovery, but exports and output showed signs of weakness.
The risks to Japan's economic outlook could fuel calls for the government to delay a nationwide sales tax hike scheduled for October, analysts say, and speculation that the Bank of Japan (BOJ) will take some steps to bolster economic growth.
The government is scheduled to raise the nationwide sales tax to 10 percent from 8 percent in October, but there are concerns this will weaken consumer spending and harm growth.
The April view that exports remained weak was unchanged from March, the office said, but there is a chance of a downgrade if economic data showed a further decline in exports.
Exports fell for a fourth straight month in March as China-bound shipments slumped again, data showed on Wednesday, reinforcing concerns that weak external demand may have knocked the economy into contraction in the first quarter.
The Cabinet Office left unchanged its assessment that consumer spending is recovering, but some economists worry that consumer sentiment will take a hit if the China-US trade dispute drags on.
Japan's manufacturing sector is exposed to the trade war because it sends electronic parts and capital goods to China, where they are used to make finished products destined for the United States.
Japan's trade talks with the United States pose another risk, the office said, though Economy Minister Toshimitsu Motegi offered some hope on Tuesday for a good result “at an early stage.”
US President Donald Trump and Prime Minister Shinzo Abe agreed last September to start trade talks in an arrangement that protects Japanese automakers from further tariffs while negotiations are underway.