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TOKYO - Japan on Tuesday said for the second straight month that the economy is in a moderate recovery despite signs of stalling, underscoring concerns about weakness in private consumption that makes up more than half the economy and holds the key to growth.
The monthly economic report from the Cabinet Office followed a batch of soft economic indicators that suggested any pullback from low growth seen late last year would be slow given the lack of strength in external and domestic demand.
"The Japanese economy is recovering at a moderate pace, although it recently appears to be pausing," it wrote, which was reported to a meeting of 28 members of relevant ministries and the central bank governor.
It made no changes to overall and each component's assessment, except for corporate views on business conditions, which are improving but affected by the suspension of output and shipments by some automakers.
Rather than the likely temporary halt in factory activity, analysts see weak private consumption must be a source of concern for the Bank of Japan, which last month ended negative rates in expectation of a cycle of wages and durable inflation.
The central bank is expected to stand pat at its two-day policy review ending Friday, at which it gives fresh GDP and inflation forecasts while gauging the impact of the weaker yen.
"We will continue to work closely with the BOJ to conduct policy flexibly in response to economic and price developments," the government says in the report.
Japanese policymakers are seen by analysts on the verge of intervening in the exchange market to prop up the yen, as further weakening would squeeze households by boosting import costs. The yen was trading at the upper range of 154-155 to the dollar on Tuesday, a level unseen since the bubble era of the 1990s.
"The pick-up in private consumption appears to be pausing," the monthly report says, referring to the GDP component that accounts for more than half of Japan's economy.
(Reporting by Tetsushi Kajimoto; Editing by Stephen Coates)