By Leika Kihara and Takahiko Wada
TOKYO (Reuters) -The Bank of Japan is expected to revise down its assessment on consumption and factory output this month, three people familiar with its thinking said, nodding to recent weak signs in the economy that underscore the fragile state of its recovery.
While this could fuel worries about policy outlook, the sources said the BOJ was expected to maintain its forecast that the economy will continue recovering moderately, suggesting the revisions are unlikely to deter it from phasing out its massive monetary stimulus in March or April.
«Consumption isn't very strong and output is falling due to the auto output disruptions,» one source said. «But there's no change to the view Japan's economy is recovering moderately,» the source added, a view echoed by the other two people.
The sources spoke on condition of anonymity as they were not authorised to speak publicly.
The board will discuss the economy's assessment and its outlook, as well as whether to tweak its ultra-loose policy, at its next meeting on March 18-19.
The BOJ currently describes consumption as «rising moderately» and output as «moving sideways».
The sources added that the weakness in consumption and output is likely to be temporary and would not derail Japan's recovery which will be propelled by robust corporate profits and expectations of continued wage gains.
Big firms will settle negotiations on 2025 pay with unions on March 13, ahead of the BOJ meeting on March 18-19. Economists project wage hikes of about 3.9% on average, versus a 3.58% pay rise deal struck in 2023 that was the highest in three decades.
BOJ Governor Kazuo Ueda has said the central bank will focus on the outcome of the wage negotiations, and
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