Japan's machinery orders rose only modestly in August after registering the biggest monthly drop in nearly 20 years in July, cementing expectations that the Bank of Japan will hold off raising interest rates until at least early next year.
The core orders, a volatile figure regarded as a key gauge of corporate capital spending, rose 6.7 percent in August from July on a seasonally adjusted basis, data from the Cabinet Office showed on Tuesday.
The figure was below a median forecast of an 11.4 percent rise and followed a 16.7 percent decline in July, the biggest drop since the government began compiling the data in 1987.
The core orders, excluding those for ships and machinery at electric power firms, were down 0.5 percent from the same month last year, lower than a market forecast for a 3.9 percent rise.
"Core orders fell from a year earlier for the second straight month, which could be a turning point," said Seiji Adachi, a senior economist at Deutsche Securities.
"We cannot determine the future trend by looking only at the August figures, but September data will be very important. If orders fall, it would be a sign that capital spending may flounder," Adachi said.
Following the data, Japanese share prices shed almost all of their earlier gains, though the benchmark Nikkei average still managed to close at a five-month high.
The yield on 10-year Japanese government bonds fell to 1.745 percent from six-week high of 1.755 percent hit earlier in the session.
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