The outlook for the world's third largest economy appears to be getting dimmer.

The Japanese government has downgraded its assessment of the economy for the second straight month.

And in its latest monthly report, it said the economic recovery appears to be pausing due to a deceleration of the world economy.

Japan's economy received a boost from reconstruction investments following last year's massive earthquake and tsunami.

But the momentum appears to be fading out.

In the latest report by the government, the view on five key components was downgraded.

These include industrial output, business investment, corporate profit, and consumption.

Overall, the Japanese government said economic recovery seems to be pausing.

This is the first time in more than three years that it has cut its view of the economy for two months in a row.

And it follows recent weak economic data.

Analysts said Japan's economy is showing a slowdown.

To deal with the situation, Prime Minister Yoshihiko Noda plans to form a supplementary budget.

The government said it expects the Japanese economy to resume its recovery as conditions improve overseas.

It also expects reconstruction-related spending to help provide support.

However, some private sector economists are less positive.

Credit Suisse Securities Japan's chief economist Hiromichi Shirakawa, said: "In our view, it's very difficult for reconstruction investment to support economy on its own because other demand situation is really weak.

"We actually expect the two successive quarter of negative GDP growth in July-September and October-December. So technically speaking, it's a mini recession."

The Bank of Japan is scheduled to hold a policy meeting next week and there's growing pressure for further easing.

channelnewsasia.com