* Nov core machinery orders up 9.3 pct vs f'cast +1.2 pct
* Govt revises up assessment on machinery orders
* BOJ Kuroda repeats economy to keep recovering moderately
* Strong data may allow BOJ to stand pat for now-analysts
By Leika Kihara
TOKYO, Jan 16 Japan's core machinery orders
jumped to a five-year high in November, a sign companies may be
ready to ramp up investment and increase wages - key elements in
Prime Minister Shinzo Abe's strategy to revive the world's
The upbeat data is likely to ease concerns about capital
expenditure, a weak link in an otherwise robust economy, and may
allow the Bank of Japan to hold off on expanding its monetary
stimulus any time soon, analysts said.
"We can expect capital expenditure to increase
significantly, with the weak yen bolstering corporate profits
and the economic outlook brightening," said Yoshiki Shinke,
chief economist at Dai-ichi Life Research Institute.
"This is pretty positive news for the BOJ as it reduces one
source of concern about the economy. The chance of an early
easing has decreased," he said.
Core machinery orders, a highly volatile data series
regarded as an indicator of capital spending in the coming six
to nine months, jumped 9.3 percent in November from the previous
month, data showed on Thursday. That was the fifth biggest rise
on record and blew past a median market forecast for a 1.2
The value of core orders, at 882.6 billion yen ($8.5
billion), was the biggest in more than five years, prompting the
government to raise its assessment to say orders are "increasing
as a trend."
Abe's plan - dubbed "Abenomics" - is to combine fiscal
spending, economic reforms and monetary stimulus to pull Japan
out of a decades-long economic slump. His efforts have already
paid dividends with Japan's economic growth outpacing its G7
counterparts in the first half of last year.
BOJ Governor Haruhiko Kuroda maintained his upbeat view on
the economy, saying it will continue a moderate recovery despite
the likely pain from a sales tax hike in April.
"Japan's economy is making steady progress toward achieving
the BOJ's 2 percent price target," Kuroda told a quarterly
meeting of the bank's regional branch managers on Thursday.
In a sign the recovery is broadening, the BOJ revised up its
assessment for five out of nine regional economies, citing
robust consumer spending as companies increase hiring or wages.
SO FAR SO GOOD
Many officials in the government and the central bank view
capital expenditure as an essential component of economic growth
because it can spur job creation, which could lead to higher
wages and stronger consumer spending.
Companies have been slow to expand investment, so signs
that capital expenditure will increase this year would be a
positive for the growth outlook, helping to quicken progress
toward ending years of grinding deflation.
Deflation has encouraged companies to sit on their pile of
cash rather than spend on wages or investment. Even companies
who do plan to invest did so overseas, lured by lower costs and
demand in emerging nations.
If domestic demand sustains its momentum, however, this
trend may change.
Encouragingly, anecdotal evidence of an uptick in capital
expenditure is already starting to emerge.
Toshiba Corp, Japan's largest computer chipmaker,
is earmarking 30 billion yen to expand a building that houses
one of its NAND memory chip factories in western Japan, with
construction to be completed around summer.
Toshiba's Chief Executive Officer Hisao Tanaka told Reuters
in October that the company would make a decision on potential
spending of up to another 400 billion yen on equipment for the
plant by March.
"As corporate revenues improve, capital expenditure is
clearly picking up even among manufacturers, which have been
slow in increasing spending," Shigeki Kushida, the head of the
BOJ's Osaka branch, told reporters on Thursday. He oversees the
Kinki region of western Japan, home to several electronics
Thursday's data showed retailers boosting spending on
orders in a sign they may be opening new stores and buying new
equipment on hopes of robust consumer spending. For example,
Japan's biggest convenience store operator Seven-Eleven Japan Co
plans to open 1,600 shops in its fiscal year that begins in
March, compared with 1,500 in the current one.
BOJ REVIEW NEXT WEEK
The data may also dispel market speculation that the BOJ
will ease again soon to pre-empt an expected downturn in the
economy from the April tax hike.
Many analysts expect the central bank to keep monetary
policy steady at its rate review next week as evidence builds
that Japan is making steady progress toward beating deflation.
Wholesale prices rose 2.5 percent in December from a year
earlier, increasing for the ninth straight month. Core consumer
inflation also hit 1.2 percent in November, passing the halfway
mark towards the BOJ's price target.
The BOJ stunned markets by delivering an intense burst of
monetary stimulus in April last year, pledging to accelerate
inflation to 2 percent in roughly two years via aggressive asset
purchases in a country mired in prolonged deflation.
Kuroda has repeatedly said the BOJ will not act just to
counter the pain from the tax hike, unless the damage proves to
be far bigger than expected.
Japan's economy slowed in the third quarter on soft exports
and capital spending. Analysts expect the economy to pick up
again as consumers try to beat the sales tax hike, although some
worry about the damage from the higher tax later this year.