Japanese core machinery orders fell 1.7 percent on the month in January, hit by a slump in orders from manufacturers partly due to suspended vehicle output over a safety scandal. The decline gives up most of a downwardly revised 1.9 percent gain in December.

The January figure was weaker than the median economist forecast of a 0.7 percent drop. Orders from manufacturers, including chemical companies and automakers, plunged 13.2 percent while those from non-manufacturers rose 6.5 percent, led by transportation. Demand for computers remained mixed.

Recent data were updated in an annual revision to seasonal adjustments: The December rise was revised down to 1.9 percent from 2.7 percent and the November fall was revised up to 3.7 percent from 4.9 percent.

On a yearly basis, orders marked their 11th straight decline, down 10.9 percent (consensus was a 9.8 percent drop) following a 0.7 percent dip in the prior month.

The Cabinet Office downgraded its assessment after holding it for more than a year, saying,"Machinery orders have weakened recently." Previously, it had said orders were"pausing."

January's result marks a weak start to the first quarter when orders are predicted by the Cabinet Office to rise 4.9 percent for the first increase in four quarters.

Econoday's Relative Performance Index (RPI) stands at minus 19, below zero, which indicates the Japanese economy is performing worse than expected after underperforming within a narrower margin recently. Excluding the impact of inflation, the RPI is at a steeply negative minus 47 to indicate, relative to expectations, significant weakness in real activity.

Machinery orders are forecast to fall 0.7 percent on the month in January (some predict an increase) after rising 2.7 percent in December and slumping 4.7 percent in November. Firms are cautiously implementing their capital investment plans amid otherwise solid demand for digitization and automation. Last month, the Cabinet Office maintained its long-held view saying"orders are pausing." Recent figures will be updated in an annual revision to the data series.

Machine Orders are the total value of new private-sector purchase orders placed with manufacturers for machines excluding volatile items such as ships and utilities. It is a leading indicator of production. Analysts consider the data an indicator of capital spending. Rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.

It is a leading indicator of production. Rising purchase orders signal that manufacturers will increase activity as they work to fill the orders. The importance of machinery orders cannot be overstated given the economy's dependence on exports. The purpose of these data is to get a picture of machinery manufacturers' order books and to collect basic material for analyzing the direction of the economy through an early understanding of trends in capital investment in machinery.