Japan's government downgraded its economic outlook for the first time in three months, noting weaknesses in private consumption and production in its February report. This adjustment reflects a more cautious view of the nation's moderate recovery pace, highlighting sluggish components not seen since a November caution of a partial stall. The revision follows Japan's unexpected slip into recession last year, primarily due to weak domestic demand. Specifically, the report points to a decrease in manufacturing activities, with notable production halts by automakers like Daihatsu Motor, affecting Toyota's operations due to a certification scandal. Additionally, household spending fell for the 10th consecutive month in December. This economic softness poses challenges for the Bank of Japan as it considers its first interest rate increase since 2007, amid ongoing efforts to navigate the country's long-term deflationary period.
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