Japan core machinery orders jump in January but underlying trend seen flat

TOKYO (REUTERS) - Japan's core machinery orders jumped in January, inflated by large orders from the steel industry, but economists say excluding this factor orders were probably flat from the previous month.

The 15.0 per cent monthly rise in core orders, a highly volatile data series regarded as a leading indicator of capital spending in the coming six to nine months, was more than economists' median estimate for a 3.0 per cent month-on-month increase, Cabinet Office data showed on Monday (March 14).

The data is unlikely to ease concerns about the economy because of its volatile nature.

"Excluding orders from the steel industry, machinery orders were likely flat compared to the previous month and the previous year," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

"The results in January are not that strong. If risks from overseas economies do not recede, companies could revise down capex forecasts."

Machinery orders from manufacturers rose by a record 41.2 per cent in January, due to a surge in large orders from the steel industry for boilers and motors.

Orders from non-manufacturers rose 1.0 per cent, less than a 4.5 per cent increase the previous month. Orders from abroad fell 29.4 per cent, the biggest decline since July 2014.

Compared to a year ago, machinery orders rose 8.4 per cent, versus the median estimate for a 3.6 per cent annual decline.

The Bank of Japan, which ends a two-day monetary policy meeting on Tuesday, stunned investors in January with the introduction of negative interest rates, but the move has sowed concern that central bank is running out of tools to generate inflation.

The world's third-largest economy shrank in the final quarter of 2015 as slow wage growth and sluggish global demand hurt consumption and exports.

While many analysts expect growth to have recovered modestly in the current quarter, the bleak outlook for global demand has led some to predict another contraction that will push Japan back into technical recession - defined as two straight quarters of shrinking gross domestic product.

Expectations for further fiscal and monetary stimulus could remain elevated due to concerns that turbulence in overseas economies could hurt consumer sentiment.