Japan’s core machinery orders rose more than expected in April, suggesting that rebuilding from last year’s earthquake will offset some of the pain from a strong yen and Europe’s debt crisis to support the fragile economy.
The 5.7 percent rise in core orders, a leading indicator of capital spending, was more than the median forecast for a 2.1 percent gain and followed a 2.8 percent drop in March, data from the Cabinet Office showed on Wednesday.
The data underscore the Bank of Japan’s view that robust domestic demand will help the country’s economy toward a moderate recovery.
But policymakers have little to cheer about with the outlook clouded by a stubbornly strong yen, slowing Chinese growth and market jitters over Europe’s debt crisis.
“Corporate profits are gradually picking up but capital spending is increasing at an even faster rate, partly helped by reconstruction demand,” said Junko Nishioka, chief economist at RBS Securities in Tokyo.
“But considering the recent cautious mood in business sentiment, it’s hard to predict that capital spending will gain further momentum.”
Compared with a year earlier, core orders, a highly volatile data series, increased 6.6 percent in April against an expected 5.1 percent annual rise.
Japan’s economy grew at an annualised 4.7 percent in the first quarter and economists expect solid private consumption and spending on rebuilding following last year’s earthquake to sustain growth this year. The IMF said the economy is on track to grow about 2 percent this year.
The murky outlook will keep the Bank of Japan under pressure to offer further monetary stimulus. But the central bank will probably keep its monetary policy unchanged on Friday to save its financial firepower in case Greece ignites fresh turmoil after the market respite offered by a euro zone agreement to shore up Spain’s banks.