The Bank of Japan on Thursday downgraded its assessments of seven out of the country's nine regions amid weak private consumption and auto production, though the economy as a whole has continued to recover.
In the quarterly Sakura report, the BOJ also noted that wage hikes are spreading from big firms to smaller ones, in a positive indication the central bank's 2 percent inflation target is within reach. It also pointed to changes in corporate price-setting behavior.
The seven regions include the Tokyo area and Tokai where Toyota Motor Corp. is headquartered. The views on Hokkaido and Shikoku were retained.
The report is among materials that the BOJ will scrutinize at its next policy-setting meeting later this month, along with the Tankan business confidence survey that painted a picture of manufacturers becoming more pessimistic while nonmanufacturers are the most upbeat in over three decades.
In March, the BOJ went ahead with its first interest rate hike since 2007 in a major overhaul of its years of unorthodox monetary easing, on the view that its attainment of 2 percent inflation backed by strong wage growth has come into view.
Japan saw the best outcome this spring of annual labor-management wage negotiations in three decades.
Core inflation in Japan has remained above the BOJ's 2 percent target for nearly two years. Rising prices of everyday goods have dented private consumption, which makes up over half of the economy as measured by gross domestic product.
Japan's economy is widely expected to contract in the January-March quarter.
