INSTANT VIEW-Japan Dec machinery orders rise more than expected

TOKYO, Feb 10 (Reuters) - Japan's core machinery orders rose more than expected in December from the previous month, easing concern that capital spending may continue to slump and shackle the economy's fragile recovery.

Japanese wholesale price deflation eased further on a recent rise in oil and commodity prices, but declines are expected to drag on in the near future as the prices of many final products are under pressure from weak demand.

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KEY POINTS:

-- Core private-sector machinery orders, a highly volatile series regarded as an indicator of capital spending, rose 20.1 percent, above a median market forecast of a 8.0 percent gain.

-- Core orders in December were 1.5 percent lower than a year earlier.

-- The 2.1 percent annual fall in wholesale prices, as measured by the corporate goods price index (CGPI), was roughly in line with the median forecast of a 2.3 percent decline.

-- Wholesale prices rose 0.3 percent in January from the previous month, against the median estimate for a 0.1 percent rise.



COMMENTARY:



YOSHIKI SHINKE, SENIOR ECONOMIST, DAI-ICHI LIFE RESEARCH INSTITUTE, TOKYO

'If you look at the quarterly data, non-manufacturers are not doing very well.

'This is a sign that Japan's domestic demand isn't strong and this will weigh on capital expenditure somewhat.

'We can still expect capital expenditure to grow this year due to investment from manufacturers.

The recovery in exports will support capital expenditure, but without much of a contribution from the services sector, overall spending growth will be gradual.'



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LINK:

To view the full table of machinery orders, go to: http://www.esri.cao.go.jp/en/stat/juchu/0912juchu-e.html

For wholesale prices, click on http://www.boj.or.jp/en/type/stat/boj_stat/cgpi/cgpi1001.pdf



BACKGROUND:

-- Core machinery orders have tumbled since the global recession and hit a record low in November.

-- Many companies have remained wary of boosting investment in plant and equipment as they are saddled with spare production capacity and face uncertainty over the outlook for final demand.

-- Wholesale price inflation hit a 27-year peak in 2008 due to a spike in oil prices but turned to record deflation last year after the global financial crisis sent commodity prices tumbling.

-- Wholesale deflation has been slowing since September as oil prices are on the rise again. Still, deflation is likely to persist due to weak domestic demand.

(Reporting by Hideyuki Sano; Editing by Edwina Gibbs)

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