Japan's core machinery orders rose 4.3% on the month in February, marking the first increase in three months and outpacing the consensus forecast of a 2.1% gain. The rebound follows a 3.5% decline in January and was driven by broad-based strength across sectors, particularly from non-manufacturers.

On the year, core orders rose 1.5%, the fifth consecutive increase and well above expectations for a 1.3% decline. February's gain was supported by a 3.0% rise in orders from manufacturers, with strong demand for equipment related to nuclear power from non-ferrous metal makers and material handling systems from steel mills. Non-manufacturers saw an even stronger pickup, with orders climbing 11.4%, led by investment in IT infrastructure, including computer systems from banks.

Despite ongoing interest in digitization and automation, the government maintained its view that machinery orders are showing signs of a pickup, cautioning that labor shortages, high input costs, and headwinds from U.S. protectionist policies continue to weigh on capital expenditure momentum.

The Cabinet Office still projects a 2.2% quarter-on-quarter decline in core machinery orders for the JanuaryMarch period, following a 2.3% increase in the prior quarter.

Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to post their first month-on-month rise in three months in February, up 2.1% (range: -0.5% to +4.9%), after slumping 3.5% in January. Plans to digitize and automate operations remain solid but labor shortages, elevated costs and the drag from the protectionist U.S. trade policy are hampering smooth implementation of capital investment.

From a year earlier, core orders, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to mark their first drop in five months, down 1.3% (range: -3.0% to +2.3%), following +4.4% the previous month.

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.