Japan's core machinery orders rose at a faster pace than expected in January in a sign that rebuilding the country's tsunami-battered north-east coast could propel capital expenditure and support the fragile economy. Core machinery orders, which help gauge the strength of capital spending, rose 3.4 percent in January from the previous month, beating a median market forecast for a 1.6 percent increase.
The data bolsters the argument that domestic demand can drive the world's third-biggest economy this year as the country rebuilds from last year's disaster and could stay the hand of the Bank of Japan when it starts a two-day policy meeting later on Monday. Other recent data, including larger-than-expected gains in industrial output and an upward revision to fourth quarter gross domestic product, also raised hopes that Japan's economy will gather momentum this year.
"The data shows corporate capital spending is rising moderately thanks partly to reconstruction-related demand, although the momentum is not that strong," said Junko Nishioka, chief economist at RBS Securities in Tokyo. Compared with a year earlier, core machinery orders increased 5.7 percent, better than the median forecast for a 4.0 percent annual increase. Japanese wholesale prices rose 0.6 percent in the year to February, matching the median forecast from economists.