-Norio Miyagawa, senior economist at Mizuho Securities
Japan's machinery orders increased more than expected in December, suggesting that companies are willing to spend following the April sales tax hike that drag the nation's economy into recession. Machinery orders rose 8.3% on month in December, according to Japan's Cabinet Office, following the 1.3% rise in the previous month and beating analysts' expectations for a 2.4% climb. The gauge is widely considered as a leading indicator of capital expenditure, which is starting to ramp up again, helping the economy out of doldrums. However, the reading is notorious for its high volatility. Orders plummeted 20% in May in the wake of the April tax increase from 5% to 8%. They have since rebounded moderately over the following months, except for a 6.4% plunge in October. The Cabinet Office's survey also showed that companies expect orders to advance 1.5% in the first quarter of 2015, following the 0.4% rise in the preceding quarter. For the central bank, increasing capital expenditure means less pressure to ease monetary policy further, as business investment underpin employment and consumer spending, which are key drivers for accelerating inflation to the 2% target.
Other growth indicators including industrial output, core household spending, and the tighter labour market all point to stronger growth last quarter.
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