September 12, 2013 / 1:01 AM / 6 years ago

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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