Japan will downgrade its assessment of the economy in a monthly report due at the end of the week, government sources told Reuters on Wednesday, as the global economic slowdown pushes the country to the brink of recession.
That would mark the fourth consecutive month of downgrades, the longest since the aftermath of the collapse of U.S. investment bank Lehman Brothers.
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The weakening outlook increases the pressure on the government and the Bank of Japan to bolster the economy and could make some lawmakers reluctant to follow through with a plan to raise the sales tax next year.
The government is scheduled to release its monthly assessment of the economy on November 16.
Last month, the government said the economy was weak but showing signs of bottoming out.
Declining exports and a drop-off in consumer spending following the expiration of subsidies on energy-efficient cars are the main reasons the government is considering a downgrade, the Nikkei newspaper reported earlier on Wednesday without citing sources.
The government has said that it will compile some stimulus measures by the end of this month, but the worst public debt burden among major economies limits the government's ability to pump-prime the economy.
The BOJ eased monetary policy for the second straight month in October as slowing global demand and fallout from a territorial row with China weighs on Japan's exports.
Japan's economy shrank in the September quarter for the first time since last year, adding to signs that slowing global growth and tensions with China are nudging the world's third-largest economy towards recession.
(Reporting by Stanley White; Editing by Chris Gallagher and Eric Meijer)