Japanese core machinery orders, the key leading indicator of business investment in equipment, surged 3.5% on the month, beating most economists' projections and easily surpassing their median forecast of being flat (-0.1%). The second straight increase after October's 2.1% gain and the fifth rise in the first 11 months of 2024 was driven by orders for chemical equipment, generators and engines from manufacturers and also propped up by persistent demand for computers from many in the services sector including information providers, financial institutions and telecom carriers.

The Cabinet Office upgraded its assessment for the first time in eight months, saying,"Machinery orders are showing signs of a pickup." In the previous six months, it had said that the pickup in machinery orders was"pausing." Capex plans are generally supported by demand for automation amid widespread labor shortages as well as government-led digital transformation and emission control.

The Bank of Japan's Tankan business survey for the December quarter showed major firms projected their plans for capital investment would rise a combined 10.6% on year in fiscal 2024 ending on March 31, 2025, somewhat maintaining the solid pace after jacking them up to an 11.1% increase in the June survey from a cautious 4.0% gain projected in March. Smaller firms raised their combined capital spending plans to an impressive 2.6% increase after projecting a 0.8% drop in June, which was still up from a 3.6% dip planned in March. Smaller firms tend to have conservative plans at the start of each fiscal year and revise them up later.

From a year earlier, core orders, which track the private sector and exclude volatile orders from electric utilities and for ships, jumped 10.3% after rising 5.6% in October and also posting their second consecutive increase and fifth in 2024. It was well above the consensus call of a 6.0% rise.

Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to post their seventh month-on-month drop in 12 months in November, down a slight 0.1%, after rising 2.1% in October and falling the previous three months. 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, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to show their sixth gain in 12 months, up 6.0% after rising 5.6% 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.