By Tetsushi Kajimoto
TOKYO (Reuters) – Japan’s main gauge of capital spending rose much stronger than expected in February, rebounding sharply from a decline a month earlier in a positive sign for domestic demand even as the yen’s decline against the dollar hampered the cost of living increased.
Core machinery orders rose 7.7% in February from the previous month, beating the 0.8% rise economists expected in a Reuters poll and more than making up for January’s 1.7% decline, Cabinet Office data showed.
Compared with a year earlier, core orders, a series of highly volatile data considered an indicator of capital spending over the next six to nine months, fell 1.8% in February, compared with a decline of 6.0 % observed by economists.
Sustained capital spending should ease concerns about weak domestic demand as government and central bank policymakers seek to fuel a virtuous growth cycle driven by durable consumption and solid wages.
Japanese companies have drawn up strong investment plans in plant and equipment in recent years, but uncertainty over the economic outlook has caused delays in implementing those plans.
Key orders data was released amid concerns about the yen’s continued weakness.
The Japanese currency slumped to 34-year lows against the dollar above 153 yen last week, which could boost import prices and add to already tight cost-of-living pressures.
Last month, the Bank of Japan ended negative interest rates, marking a seismic shift from its decade-long super-accommodative policy, after major companies offered a big pay rise during annual wage talks in mid-March.