UPDATE 1-Japan's machinery orders jump in Aug, bodes well for firm recovery
* Core machinery orders +5.4 pct mth/mth vs f'cast +2.0 pct
* Data suggests delayed recovery in capital spending
* Recovery in capex a key to success of "Abenomics"
* Govt describes machine orders as picking up
TOKYO, Oct 10 (Reuters) - Japan's core machinery orders rose faster-than-expected in August, posting its first rise in three months, in a welcome sign for capital spending seen as vital for durable recovery in the world's third-largest economy. The 5.4 percent month-on-month rise in core orders, which exclude those of ships and electric power utilities, beat economists' median forecast for a 2.0 percent gain and followed a slight fall in July, data from the Cabinet Office showed. 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 cause a virtuous cycle of higher capital spending boosting wages and private consumption. "The 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. "Capital spending will strengthen if the government steadily implement growth strategy and tax breaks for corporate investments. A global recovery will also be needed in order for capital spending growth to be sustainable." The government and the Bank of Japan see a recovery in capital spending as a key in driving a sustained economic recovery and ending 15 years of grinding deflation, paving the way for the ultimate success of Abe's policies. Analysts expect companies to spend more on plant and equipment in the coming months as the central bank's key tankan survey showed earlier this month confidence among big manufacturers hit its highest in nearly six years in the third quarter. The Cabinet Office raised its view on machinery orders, saying they are picking up, from its previous view it was increasing moderately. The data showed orders from manufacturers rose 0.8 percent, while those from the services sector increased 6.2 percent, underscoring firm domestic private consumption. Compared with a year earlier, core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, grew 10.3 percent in August, above economists' median estimate for a 8.7 percent gain. Japan's economy expanded for three straight quarters in April-June, outpacing other G7 nations with an annualised growth of 3.8 percent, as Abe's reflationary policies bolstered household spending and drove down the yen, benefiting exports. The BOJ, which offered an intense burst of monetary stimulus in April to achieve 2 percent inflation in two years, revised up its assessment of capital expenditure on Friday to say it is picking up.