Japan Feb machine orders rise, point to firm capex

TOKYO, Apr 10 (Reuters) Japanese machinery orders, a key gauge of capital spending, rose in February from the previous month, a sign that strong investment by companies is likely to keep underpinning a steady recovery.

Core private-sector machinery orders rose 3.4 percent in February from the previous month on a seasonally adjusted basis, the government said on Monday, a touch higher than economists' forecasts of a 3.3 percent increase.

''The rise is pretty widespread, which is a good sign and suggests capital spending will likely stay in an uptrend for quite a long time ahead,'' said Takehiro Sato, executive director at Morgan Stanley.

In January, core orders -- a volatile series regarded as a leading indicator of capital spending in the coming six to nine months -- fell 6.2 percent, the first fall in four months.

The Cabinet Office, which releases the data, has forecast that core orders would likely show a rise of 1.3 percent for January-March from the previous quarter.

A government official said the target would be achieved if March orders rise 1.1 percent or more.

The official also said the government maintained its view that machinery orders are on a rising trend.

Reflecting strong appetite for capital spending by Japanese companies, orders had already been rising for five straight quarters up till the final three months of 2005.

Compared with February last year, core orders, which exclude those for ships and for machinery at electric power firms, rose 8.2 percent, slightly above a median forecast of a 7.9 percent rise in a Reuters poll.

Corporate investment has been one of key engines of Japan's economic recovery, reflecting rises in profits that prompted firms to increase capital spending in an increasingly competitive environment.

In October-December, the world's second-largest economy grew 1.3 percent from the previous quarter, with capital spending rising 0.4 percent, the seventh straight quarter of increase.

''Capital spending may show a flat reading or even a fall in January-March gross domestic product data, but this should only be a temporary moderation in the data,'' said Naoki Iizuka, chief economist at Dai-ichi Life Research Institute.

Traders now await Bank of Japan Governor Toshihiko Fukui's remarks on Tuesday after a two-day policy board meeting ends to find clues for when the central bank could start raising interest rates.

The BOJ, which last month ended its five-year-old super-loose policy of flooding the banking system with excess funds, is widely expected to maintain its new policy of guiding interest rates near zero percent at least for the next few months.

REUTERS PV RN1132