TOKYO (Reuters) -Japan’s government saw that the economy in October was recovering moderately because of solid capital expenditures in a monthly report issued on Wednesday.

The government report also reiterated its cautiously optimistic outlook that the economy, the world’s fourth-largest, is expected to recover gradually led by improving employment conditions but warned of downside risks from U.S. trade policies.

“Although the impact of the U.S. trade policies is primarily affecting the automotive industry, the economy is recovering moderately,” the Cabinet Office said in the report.

Japan’s capital spending was “picking up moderately”, thanks to solid investment in software and digitalization, according to the report.

The government kept its view on private consumption, which account

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