Japan's Core Machinery Orders Rise 3.4% in November, Beating Forecasts

TOKYO, Japan - Japan's core machinery orders unexpectedly surged by 3.4% in November 2023 compared to the previous month, exceeding analyst expectations, as per government data released on Monday.

The increase marks the second consecutive month of growth and surpassed the 0.4% decline estimated in a Reuters poll. Notably, orders from manufacturers jumped 6.0%, while those from core non-manufacturers excluding the ship and electricity sectors rose 1.2%.

Masato Koike, senior economist at Sompo Institute Plus, attributed the increase to strong demand for capital investment driven by labor shortages and digitalization.

Despite concerns regarding the incoming U.S. Trump presidency, a Reuters Tankan survey conducted last week indicated improved business sentiment among manufacturers.

Koike further noted that any direct impact of a potential central bank rate hike on capital investment appears to be minimal at present.

Sources have informed Reuters that the Bank of Japan is likely to raise interest rates at its policy meeting scheduled for January 23-24, assuming no significant market disruptions following Donald Trump's inauguration.

On a year-on-year basis, core machinery orders surged by 10.3%, outperforming the forecast of 5.6% growth. This volatile data series is considered a leading indicator of capital spending in the coming six to nine months.

The Cabinet Office expressed optimism in its assessment of machinery orders, indicating signs of improvement.