Surprise revenue in Japan core machinery orders suggests capex pickup

In July, Japan's core machinery orders suddenly surged for a second straight month, easing some pessimism regarding capital expenditure, though concerns remain that poor demand as well as the yen's profits might still discourage companies from spurring investment.

Shinzo Abe's government has been counting on capital expenditure in order to boost private sector-led growth, though business investment has been slow to pick up. It’s because of the uncertain outlook as well as external headwinds.

On Monday, Cabinet Office data disclosed that a highly volatile data series regarded as an indicator of capital spending, core machinery orders in the coming six to nine months, edged up 4.9% in July from last month.

The soar in core orders, excluding ships and orders from the electric power industry, compared with a 3.5% drop expected in a Reuters survey of economists as well as a 8.3% surge in June.

By the way, the reading followed a recent run of poor indicators, including factory output, exports and household spending, assisting to allay fears that Japan’s economy might lose momentum in the current quarter.

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