TOKYO, Feb 19 (Reuters) - The Japanese government on

Wednesday stuck to its view that the economy was recovering

moderately, but flagged U.S. trade policies as key factors to

watch as President Donald Trump's proposals on tariffs cast

uncertainty over the economic outlook.

In its monthly economic report for February, the Cabinet

Office maintained its overall economic assessment for the

seventh consecutive month, as persistent inflation particularly

of every-day items chips away at consumer appetite.

"Although data showed year-on-year increases (in wages) are

continuing, the growth in consumption is suppressed when

comparing with the growth in income," a Cabinet Office official

said upon the report's release.

Japan's economy grew at a faster-than-expected annualised

rate of 2.8% in the October-December quarter on gains in

business spending and a surprise increase in consumption, gross

domestic product (GDP) data showed this week.

The Cabinet Office also mentioned the need to pay close

attention to U.S. policies particularly on trade, with a slew of

more detailed tariff announcements expected from U.S. President

Donald Trump.

Trump has raised levies on imports steel and aluminium, and

is targeting automobiles, and has directed his economics team to

devise plans for reciprocal tariffs on every country that taxes

U.S. imports. Such proposals have stoked uncertainty for

investors and policymakers, and buffeted global financial

markets.

Transport equipment including automobiles account for 36% of

Japan's 21.3 trillion yen ($140.12 billion) exports to the U.S.,

the Cabinet Office said. The transport machinery manufacturing

industry accounts for 3% of Japan's GDP.

The government raised its assessment on exports for the

first time in 18 months, attributing it to increase in exports

of machine tools to China as well as chip-making equipment to

South Korea, Taiwan and Southeast Asian countries.

It also revised down its view on imports to "almost flat"

from "showing movements from picking up recently."

The report was presented on Wednesday at a meeting of

relevant cabinet ministers and Bank of Japan Governor Kazuo

Ueda.

($1 = 152.0100 yen)