Japan's core machinery orders fell much less than expected in August, suggesting a relatively firm pickup in capital expenditure that is seen as crucial for sustainable economic growth. Cabinet Office data on Wednesday showed core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, fell 2.2 percent in August from the previous month.
That fall was much smaller than the 5.5 percent decline expected by a Reuters poll of economists, following a 4.9 percent increase in July. Compared with a year earlier the core orders, which exclude ships and orders from the electric power utilities, increased 11.6 percent in August, versus a 6.5 percent gain expected by economists.
Japanese policymakers are counting on capital spending to foster sustainable growth in the world's third largest economy, but businesses have been slow to invest in the face of sluggish demand, the yen's gains and external headwinds. Capital expenditure has recently shown some signs of a pickup as demand for smartphones has kept the information and technology sector humming, although some analysts doubt it is sustainable. "Capital spending is holding firm although it is not so strong as being a driver of GDP growth," said Yuichiro Nagai, economist at Barclays Securities. "The risk would be a spike in the yen beyond 100 to the dollar, which would discourage manufacturers to invest."