TOKYO (Reuters) – The Bank of Japan will consider downgrading its assessment on factory output at this month’s policy meeting, sources said, as supply disruptions caused by China’s strict COVID-19 lockdowns take a heavy toll on the economy.
The central bank may also warn of heightening risks to the global economy and exports, as China’s slowdown and the fallout from Russia’s invasion of Ukraine cloud the outlook, they said.
But the central bank is likely to maintain its view the world’s third-largest economy is “picking up as a trend,” as an expected rebound in consumption offsets some of the weakness in output, said three sources familiar with its thinking.
“While the economy may have experienced temporary weakness in April-June, the economy’s recovery path remains intact,” one of the sources said, on condition of anonymity.
In its most recent assessment made in April, the BOJ says output and exports “continue to increase as a trend.”
Data released on Tuesday showed factory output slumped 1.3% in April, as China’s COVID-19 lockdowns and wider supply disruptions hit manufacturers.
(Reporting by Leika Kihara and Takahiko Wada; Editing by Sam Holmes)
