Japan’s government lowered its main economic assessment from the previous month in November, the first downward revision since January 2023 and also decreased its assessment on capital investment for the first time in 23 months, the Cabinet Office said on Wednesday.

The monthly economic report said the Japanese economy is recovering at a moderate pace, “although it recently appears to be pausing in part.”

It also said that business fixed investment “appears to be pausing for picking up.”

An official at the Cabinet Office said that corporate profits and sentiment remained solid but had not led to higher wages, capex and consumption.

“Capital investment plans were strong but the implementation of capex are delayed," the official told reporters. "Capex fell q/q in the third quarter (-0.6% in Q3 vs. -1.0% in Q2) for the second straight drop.”

He added high costs and uncertainties over the global economy were behind the delayed capex.

The official also said spending linked to services remained solid but spending on goods fell on the back of price hikes, while domestic demand lacks rising momentum.

However, the government left its assessment on private consumption, which is picking up, and other economic components.

As for the near-term outlook, the government maintained its optimistic view, saying the economy is expected to continue recovering at a moderate pace with the improving employment and income situation, supported by the effects of its policies.

However, the government maintained its cautious view, repeating that slowing down of overseas economies presented a downside risk to the Japanese economy, including the effects of global monetary tightening and the concern over the prospect of the Chinese economy.

"Full attention should be given to price increases, the situation in the Middle East and fluctuations in the financial and capital markets,” the office noted. The government maintained the assessment on overseas economies for the seventh straight month, saying the global economy is recovering, despite weakness in some regions.