TOKYO (AP) _ Japan's economy is showing sure signs of recovery this year, including increased business investment, although uncertainties remain, an organization of wealthy nations said Wednesday.

The upturn can be seen in rising wages that should help encourage consumer spending, the Organization for Economic Cooperation and Development said in a report on Japan's economy.

The OECD, a 29-member Paris-based group of rich countries, including Japan and the United States, acknowledged that fears about a future downturn remained.

A dependence on public works, continued weak consumer spending and a surge in bankruptcies could be damaging, it said. But such a pessimistic scenario was unlikely, the OECD said.

The risks are worse for 2001 and 2002 because layoffs and other restructuring efforts may prove disruptive _ especially in the real estate, construction and financial sectors, areas still entrenched in old ways of doing business, said OECD senior economist Yutaka Imai.

``The underlying trend is toward more autonomous expansion. Of course, we do not exclude risks,'' he said in Tokyo.

The Japanese economy is going through basic changes, but it still has not achieved the dynamic momentum of the American economy, Imai said.

Among the report's other findings:

_More competition is necessary in the telecommunications sector, including breaking up Nippon Telegraph and Telephone Corp., Japan's largest telecommunications company.

_The banking sector still has a way to go before bad-debt problems are solved.

_Better monitoring of public works projects is needed to reduce waste and corruption.

_The health system must be reformed to provide long-term care for the elderly.