UPDATE 1-Flat Japan machinery orders a check on building optimism
(Adds analyst quote, details) * Core machinery orders flat mth/mth vs f'cast +2.4 pct * Manufacturers' orders rise, boding well for capex * Abe to raise tax, mull Y5 trln extra budget-source By Stanley White TOKYO, Sept 12 (Reuters) - Japan's core machinery orders were unexpectedly flat in July, a weak spot in a run of strong recent data and a reminder that firms are still not confident enough about the economy's recovery to aggressively increase capital expenditure. The monthly change in core orders, which exclude those of ships and electric power utilities, was weaker than a median market forecast for a 2.4 percent increase, Cabinet Office data showed on Thursday. Orders had fallen 2.7 percent in June. A large upward revision to capital expenditure in gross domestic product data on Monday offered some evidence that corporate investment is stirring to life, which policymakers consider essential to ensure self-sustaining growth. "The data isn't necessarily bad. Manufacturers' orders, which had been weak, have risen. The economy likely bottomed out in the final quarter of last year and capital spending is finally catching up," said Junko Nishioka, chief Japan economist at RBS securities. Orders from manufacturers rose 4.8 percent, while orders from the services sector were steady, the data showed. Compared with a year earlier, core orders, a highly volatile series regarded as an indicator of capital spending in the coming six to nine months, increased 6.5 percent in July, less than the median estimate for a 7.6 percent increase. There are some signs that corporate sentiment is improving as the government's reflationary policies and the Bank of Japan's stimulus bolster growth, with confidence among big manufacturers rising to a four-year high. A source confirmed to Reuters local media reports that Prime Minister Shinzo Abe has decided to go ahead with a planned rise in the sales tax, although he will cushion its impact with a support package worth around 5 trillion yen ($50 billion). Major political parties agreed last year to raise the 5 percent sales tax to 8 percent next April and to 10 percent in 2015 to pay for rising welfare spending, provided that the economy is strong enough to withstand the hikes. ($1 = 99.9850 Japanese yen) (Writing by Leika Kihara; Editing by John Mair)
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