The government on Wednesday downgraded its assessment of Japan's economy for the first time in 10 months, saying it is recovering moderately but "appears to be pausing in part" on weak domestic demand, a worrying sign before new inflation relief steps are rolled out.
Among key components, the Cabinet Office cut its view on capital spending, the first in nearly two years, noting in its monthly report that the recent pick-up is "pausing" partly due to slowing global growth, particularly in China.
The latest assessment came after Japan's economy marked its first contraction in three quarters in July-September, with gross domestic product falling at an annual real rate of 2.1%, as capital spending and private consumption, both key gauges of domestic demand, fell and export growth slowed.