Japan govt. to keep view economy recovering despite virus risk - sources

Japanese national flags flutter in front of buildings at Tokyo's business district

TOKYO (Reuters) - Japan's government is expected to maintain its assessment that the economy is recovering in a monthly report due on Thursday, two sources familiar with its thinking said, despite the widening fallout from the coronavirus outbreak.

The assessment would come even as data released on Monday showed the world's third largest economy shrank at the fastest pace in almost six years in the October-December quarter as a sales tax hike hit consumer and business spending.

In its monthly report for February to be released on Thursday, the government will make slight tweaks to language describing the economy as "recovering moderately despite continued weakness in exports," the sources said.

But it will stick to its assessment that the economy remains on a recovery trend as Japan's tightening job market continues to push up wages and household income, they said on condition of anonymity as they were not authorised to speak publicly.

The assessment will also reflect the expected boost from the government's $122 billion (93.84 billion pounds) fiscal package compiled in December to head off heightening overseas risks, they said.

On the outlook, the government will warn that risks to the economy were heightening due to the coronavirus outbreak, the sources said.

The government's assessment would run counter to dominant views among private analysts that Japan's economy is on the cusp of recession as the epidemic hits supply chains and tourism.

(This story corrects release date of report to Thursday, not Wednesday)

(Reporting by Yoshifumi Takemoto, writing by Leika Kihara; Editing by Chizu Nomiyama)