The fresh trading week brings some good news for the Japanese economy with core machinery orders posting a gain for the second consecutive month during November – an encouraging indicator of increased capital spending in the near future. Core orders rose by 3.4% Mom during in the month of November, well above economists’ expectations for a 1.4% increase, although the figure was slightly lower than the previous month’s reading of 3.4%.

On an annual basis, core machinery orders surged by 11.6% YoY against economists’ forecast for a jump by 6.1% instead. The stronger than expected readings can help reassure policymakers who are banking on higher corporate investment to support Japan’s economic recovery from the coronavirus crisis. Core machinery orders jumped by 12.9% MoM among Japan’s manufacturers while non-manufacturing firms saw a contraction in core orders by 0.8% during the period.

The jump in core machinery orders offer some relief to the economy as it points to businesses across Japan being interested in investing more despite facing strong pressures from soaring raw material and energy costs. While wholesale inflation soars, firms are also facing pressure on account of the weak domestic consumption levels, raising considerable uncertainty for Japan’s economic outlook.

While analysts maintain that the Omicron variant’s spread clouds the global economic outlook and weighs on capital investment across Japan, the government has turned more optimistic about capital spending, raising its forecasts. In addition to the latest spike in cases worldwide and continued raw material shortages, government officials expressed hope that firms in the country could continue to invest more in growing their business with a focus on the future.

Later this week, Japanese yen traders will turn their attention on the BOJ policy meeting in anticipation of the central bank upgrading its outlook for the economy and inflation. After gaining 1.2% over the previous week against the US dollar, the Japanese yen is enjoying support early on Monday from the positive economic data release.