TOKYO (REUTERS) - Japan kept the overall view on its economy unchanged in May, saying it showed signs of improvement and removing a reference to Covid-19 in its headline assessment for the first time since the start of the pandemic.

"The economy is showing signs of picking up," the government said in its May economic report.

Looking ahead, it was necessary to pay attention to downside risks amid worries about the pandemic's impact in China and a prolonged Ukraine crisis, the government said.

The government cut its assessment of imports after a sharp drop in shipments from China, while raising its views on the employment situation and housing investment.

On imports, the government said they were showing weakness, against describing them previously as being mostly flat.

Japan's imports from China declined 20.8 per cent in April from the month before as heavy Covid-19 curbs in major mainland cities such as Shanghai disrupted supply chains and paralysed economic activity in Asia's top economy.

The authorities raised their view on employment conditions after the jobless rate edged down to a near two-year low of 2.6 per cent in March, saying they were showing signs of picking up, against previously describing them as showing weakness.

They also raised their assessment of housing investment, saying it was largely flat due to an improvement in apartment construction. The government had previously said housing investment was weakening.

Analysts forecast Japan's economy will recover on stronger consumption in the coming months after it posted an annualised 1 per cent dip in January-March due to spiking Covid-19 cases and pressure from surging commodity prices.