UPDATE 1-Japan machinery orders up, but outlook uncertain

Tue Dec 11, 2012 7:37pm EST

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(Adds analyst quotes, details)
    * Oct machinery orders +2.6 pct vs forecast +3.0 pct
    * Govt cuts view on machinery orders
    * Japan in recession, uncertainty clouds outlook

    By Tetsushi Kajimoto
    TOKYO, Dec 12 (Reuters) - Japan's core machinery orders rose
for the first time in three months in October, but uncertainty
over the global outlook will likely continue to weigh on
business investment and dull the economy's recovery from
recession.
    Core machinery orders, a highly volatile data series seen as
a leading indicator of capital spending in the coming six to
nine months, rose 2.6 percent in October from September, when
they had fallen 4.3 percent, Cabinet Office data showed.
    Despite the October rise, which was below a forecast rise of
3.0 percent in a Reuters poll, the government cut its assessment
to say the trend for machinery orders was weakening.
    "Japan's economy can emerge from recession in the first
quarter as consumer spending and exports are expected to pick
up," said Yasuo Yamamoto, senior economist at Mizuho Research
Institute.
    "But in order for growth to accelerate even further, capital
expenditure needs to improve. Unfortunately, capital expenditure
is likely to remain weak."
    Policymakers are concerned that a weak manufacturing sector
will hurt the broader economy as companies cut wages and delay
investment, keeping the pressure on for stimulus steps.
    The Bank of Japan will likely ease monetary policy next
week, sources say, probably by expanding its asset-buying and
lending programme by another 5-10 trillion yen from the current
91 trillion yen. 

    
    Compared with a year earlier, core orders, which exclude
those for ships and power utilities, rose 1.2 percent in
October.
    Japan's economy outperformed most of its Group of Seven
peers at the start of the year on robust spending by consumers
and reconstruction after last year's earthquake and tsunami.
    But the economy contracted for a second straight quarter in
July-September, meeting a common definition of economic
recession, and analysts expect another contraction in the final
three months of this year.
    Japan's main opposition Liberal Democratic Party (LDP) and
its smaller ally look set to win a solid majority in elections
this weekend, returning to power for the first time since 2009
with calls for radical monetary easing and tougher stance on
China over some disputed islands in the East China Sea.

 (Additional reporting by Stanley White; Editing by John Mair)
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