By Mayumi Otsuma and Toru Fujioka Nov. 25 (Bloomberg) -- The Bank of Japan downgraded its assessment of the economy for the first time in three months, saying growth is becoming “increasingly sluggish.” “The increased sluggishness in Japan’s economic activity will likely persist over the next several quarters as the slowdown in overseas economies becomes more evident,” the central bank said in a report in Tokyo today. Exports have been falling because of the yen’s advance and slower global growth, and the declines will continue, the bank said. The Bank of Japan kept its benchmark interest rate at 0.3 percent last week after a report showed the world’s second- largest economy fell into its first recession since 2001. Governor Masaaki Shirakawa said the outlook remains “highly uncertain” and it will take some time to recover. Weakening overseas demand is triggering a slump in industrial output, the bank said, and declines in production will accelerate “in the immediate future,” the report said. The central bank also said increases in consumer prices will “moderate,” removing the word “gradually” from its description of inflation. Japan’s financial conditions have become “less accommodative” because large and small companies are having difficulty borrowing funds, the bank said. The report said an increasing number of firms are postponing sales of bonds and commercial paper. As a result, large companies are borrowing more from banks, the report said. To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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