Japanese core machinery orders, the key leading indicator of business investment in equipment, posted their first month-on-month increase in four months in October, up 2.1%, coming in well above the consensus call of +1.1% and following a surprise drop (-0.7%) in September.

The increase was propelled by a 12.5% surge in orders from manufactures: electric machine firms for computers, pulp and paper makers for boilers and turbines and still mills for motors and transformers. Orders from the non-manufacturing sector marked a 1.2% dip in light of a pullback in computers from telecom firm and the financial industry after recent gains.

Last month, the Cabinet Office forecast that core orders would post a sharp 5.7% rebound in the October-December quarter to more than make up for the drops seen in the previous two quarters. Capex plans are generally supported by demand for automation amid widespread labor shortages as well as government-led digital transformation and emission control.

The Cabinet Office maintained its assessment for the fifth consecutive month, saying,"The pickup in machinery orders is pausing."

From a year earlier, core orders from the private sector excluding volatile orders from electric utilities and for ships recorded their first rise in three months, up 5.6%, also much higher than the median forecast of +2.6%, after posting an unexpected drop (-4.8%) the previous month.

Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to post their first month-on-month increase in four months in October, up 1.1%, after marking a surprise drop (-0.7%) in September. Last month, the Cabinet Office forecast core orders would post a sharp 5.7% rebound in the October-December quarter to more than make up for the drops seen in the previous two quarters. Capex plans are generally supported by demand for automation amid widespread labor shortages as well as government-led digital transformation and emission control.

From a year earlier, core orders from the private sector excluding volatile orders from electric utilities and for ships are expected to record their first rise in three months, up 2.6% after falling 4.8% previously.

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.