TOKYO (AFP) — Japan said Monday core machinery orders, a closely watched barometer of business investment, surged at the fastest pace in more than seven years, easing fears of an imminent recession.
A rise in Japanese bank lending meanwhile suggested that the domestic financial sector remains resilient amid global credit problems, analysts said.
The Cabinet Office said the core private-sector machinery orders, which exclude particularly volatile demand from power companies and for ships, soared by 19.6 percent in January from the previous month.
Market forecasts had been for a much smaller gain of about 3.1 percent.
Economists said large one-off orders for items such as transport equipment were largely behind the sharp increase in orders, which rose for the first time in three months and at the fastest pace since August 2000.
"But it is a good thing to have a positive number anyway because that would ensure capital spending growth at least through the spring," said Tomoko Fujii, head of economics for Japan at Bank of America.
"After that, we already have a downturn in the production and profit cycles, which means that companies would begin to refrain from new investment."
A separate report from the central bank showed that outstanding loans at Japanese banks rose 0.9 percent in February from a year earlier.
"There's no serious credit crunch in Japan yet. The machinery orders and the bank loan data suggest that the near-term recession risks should be limited," said Fujii, while adding that "risks to the economy are on the downside."
Concern about the health of Asia's largest economy have grown after earlier reports showed falls in industrial output and corporate capital spending, while exports to the ailing US economy are declining.
Many analysts now expect the government to downgrade its estimates of fourth-quarter economic growth on Wednesday.
The value of core private sector machinery orders received in January reached 1.22 trillion yen (11.9 billion dollars), the highest since October 1996, the government said.
Even so the Cabinet Office left unchanged its assessment that the overall trend in machinery orders is flat for a ninth straight month.
The data was influenced by large, one-off orders for a power generator by the steel industry and for transportation equipment.
Machinery orders placed by the manufacturing sector rose 13.8 percent with orders from the iron and steel industry surging by almost 294 percent.
Orders placed by non-manufacturers jumped 25.9 percent as those from the transportation service sector surged almost 52 percent.
The Cabinet Office said core private-sector machinery orders are forecast to rise 3.5 percent in the three months to March from the previous quarter.
But it seems unlikely that machinery orders will remain robust even if they show a solid performance in the first quarter of 2008, warned Naoki Murakami, economist at Goldman Sachs.
"Corporate earnings have already peaked out from October-December 2007 and companies, mostly manufacturers, are curbing capital spending," he wrote in a note to clients.
The bullish data failed to boost the Tokyo stock market, where fears of a US recession weighed on sentiment after a weak US jobs report.
The benchmark Nikkei-225 share index was down 1.43 percent at the end of morning trade, trawling fresh six-week lows.
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