Tokyo, Aug. 15 (Bloomberg) -- The Bank of Japan said a slump in manufacturing is starting to spread through the economy by eating into household income, which will weigh on domestic demands at a time when exports are declining. ``Industrial production continues to decline sharply,'' the BOJ said in its monthly report. ``Profits and investment are worsening, particularly in manufacturing. Affected by such developments, household income seems to be weakening.'' The downgrade in the central bank's assessment of the economic outlook echoes the reasons given for yesterday's decision to inject another 1 trillion yen ($8.2 billion) into the money market and buy an extra 200 billion yen of government bonds each month. Any further deterioration of the world's second-biggest economy may prompt BOJ Governor Masaru Hayami to pump even more money into the banking system to prod banks to lend more and combat deflation. Hayami yesterday said the bank would expand the supply of money more if necessary. The bank said there's a growing view that a global economy may be delayed. The government yesterday reported that industrial production fell 0.8 percent in June, more than the initial estimate of a 0.7 percent drop, and the fourth straight decline. The economy probably shrank 0.2 percent in the three months ended June 30, after contracting a similar amount in the first quarter. Japan is a drag on a global economy already reeling from a slowdown in the U.S. and Europe. The bank also warned the drop in prices could worsen. ``Downward pressure on prices may intensify,'' it said. The central bank has pledged to keep interest rates near zero and banks flooded with cash until consumer prices, excluding fresh food, stop falling. Those prices fell 0.6 percent in June from a year ago. Heizo Takenaka, Japan's minister for economic and fiscal policy, yesterday said the central bank could do more to halt declines in asset prices. Bonds snapped a five-day rally today on speculation the central bank will come under pressure to set a target for inflation and set policy to achieve that target. Hayami has repeatedly said he opposes adopting an inflation target.