Core private sector machinery orders expanded a seasonally adjusted 10.7 percent in October from the previous month for the second straight monthly increase, the government said Wednesday. The figure suggests a recovery in capital investment.
The value of orders, widely regarded as a leading indicator of future capital spending, totaled ¥903.8 billion, the Cabinet Office said. The orders exclude those for ships and from utilities because of their volatility.
The government upgraded its basic assessment of core machinery orders for the first time in six months, saying they are showing “signs of picking up.” Last month, it said they were “at a standstill.”
The increase followed a 7.5 percent gain in September.
The figures are closely watched as Prime Minister Shinzo Abe’s government sees business investment — which accounts for around 15 percent of Japan’s gross domestic product — as a pillar of economic growth led by the private sector.
“The orders have started bottoming out,” said Hiroshi Watanabe, senior economist at SMBC Nikko Securities Inc. “Though firms were seen to put off investment in June to August amid concerns about Chinese and emerging economies, such moves have run their course.”
The orders are expected to fall in November — in reaction to the sharp gain in October — but recovery is likely to remain, Watanabe added.
Orders from the manufacturing sector surged 14.5 percent in October to ¥376.5 billion, representing the first rise in five months. Those from the nonmanufacturing sector expanded 10.7 percent to ¥534.1 billion, for the second straight monthly gain.
The rise was led by large orders for rail cars placed by a firm in the transport and mail service industries. In the manufacturing sector, orders for engines and chemical machinery contributed to the increase, according to the data.
As orders increased only in selected industries, it remains to be seen whether such a trend will continue, a Cabinet Office official said.
Total orders, including those from the domestic public sector and abroad, jumped 20.9 percent to ¥2.79 trillion.
Overseas demand for Japanese machinery, an indicator of future exports, soared 41.6 percent to ¥1.29 trillion.