Japan took another step forward to solidifying a durable economic recovery, as core machinery
orders rose faster-than-expected in August, providing a welcome sign for capital spending seen as vital for achieving sustainable growth.
The 5.4 percent month-on-month rise in core orders, which exclude those of ships and electric power utilities, was the first rise in three months, data from the Cabinet Office showed on Thursday. It also beat economists' median forecast for a 2.0 percent gain and followed a slight fall in July.
The outcome is an encouraging sign for Prime Minister Shinzo Abe, who is hoping the positive mood generated by his reflationary policies, dubbed "Abenomics", will lead to a virtuous cycle of higher capital spending, growth in wages and private consumption.
The government and the Bank of Japan see a recovery in-capital spending as a key in driving a sustained economic recovery and breaking 15 years of grinding deflation, paving the way for the ultimate success of Abe's policies.
Growth so far this year suggests that the recovery in the world's third-largest economy is solidifying, although the jury is still out on whether capital spending is about to take a decisive turn for the better.
Second quarter gross domestic product data last month showed capital spending rose 1.3 percent, marking the first increase in six quarters. "The (machinery) data confirmed a recovery in capital spending led by non-manufacturers, reflecting effects from Abenomics," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.