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The sentiment index for small non-manufacturers turned positive for the first time in 21 years with an increase to 4, while the reading for small manufacturers was 1, the first positive number for six years.
However, large Japanese companies have scaled back their capex projections, expecting to increase FY 2014 spending by 4.6% vs a forecast of 5.1% three months ago.
"We still don’t find any evidence that corporates are really starting to get confident about the sustainability of the recovery and actually ramping up domestic investment," says HSBC economist Izumi Devalier. "And that remains a worry in an environment where consumption is going to weaken next year."
As expected, Japanese machinery orders rose 0.6% in October vs -2.1% in September.
On year, bookings +17.8% vs +11.4% previously and consensus of +15%.
The figures "should ease concerns that the fledgling recovery in business...(investment) has already come to an end," says Economist Marcel Thieliant. Q3 GDP was revised down earlier this week, partly due to lower-than-expected business expenditure.
Core orders topped ¥800B for the third consecutive month for the first time since 2008. The trend "points to a renewed rise in capital spending" in Q4, says Thieliant.
The Nikkei is -0.6%, while the USD-JPY is -0.2% at ¥102.60. (PR)
Bank lending +2.2% in November vs +2% in October. (PR)
Current account deficit ¥127.9B ($1.24B) in October vs surplus of ¥587.3B in September and consensus of ¥153B. (PR)
"A downward revision in capital expenditure was what weighed on the revised figures," says RBS Securities Japan chief economist Junko Nishioka. However, the figures mark the bottom of the capex cycle, Nishioka says. "I expect capital spending to return to a recovery trend in the October-December quarter," she predicts.
The Nikkei is +2.3% and the USD-JPY is +0.2% at ¥103.05, with the stock index and the dollar boosted by the strong U.S. jobs report on Friday.
"This is just the beginning. It's not the real move," says Kyle Bass (speaking to Steven Drobny) of the move down in the yen (FXY +0.6%) this year. "The real move happens when it runs away from the authorities and they lose control." On the record as saying dollar/yen goes to ¥200, Bass says if he's right about Japan, it will go much further than that. ¥500? No, but once currencies get moving in a certain direction, they often swing way too far.
Wake me when dollar/yen goes to ¥350, says Bass when asked at what point he becomes a buyer in Japan.
The heat over the islands dispute in the East China Sea has been turned up further, with China sending fighter jets and an early warning aircraft into an area that the country last week designated as an Air Defense Identification Zone.
China's action follows the U.S., Japan and South Korea sending military planes into the region without telling Beijing first, in defiance of the latter's directives that they should provide prior notification.
However, China also played down the threat of the military action it had threatened against aircraft that hadn't informed it of their intentions.
China and Japan lay claim to the islands, which are known as Senkaku in the latter country and Diaoyu in China. The last flare-up a year ago caused much damage to trade between the nations.
The Nikkei hit its highest level in almost six years, rising 1.8% to 15,727 as the yen continued to fall vs the dollar following U.S. economic data overnight, including surprisingly strong weekly jobless data.
At the close of Tokyo trading, the USD-JPY was at ¥102.08, well above Wednesday's corresponding level of ¥101.53. The yen is now at ¥102.19.
Elsewhere in Asia, Hong Kong -0.2%, China +0.8%, India +0.7%.
The U.S. has involved itself in the latest flare up of the islands dispute between Japan and China in the East China Sea by flying two unarmed B-52 bombers in the area without informing Beijing.
The U.S. moves comes after China included the islands - known as Senkaku in Japan and Diaoyu in China - in an Air Defense Identification Zone, and warned that it would take military action against airplanes flying in the region without notification.
Meanwhile, Japanese airlines have also defied Beijing and flown through the area without providing China with flight plans.
At stake in the row are fishing rights and access to up to 160B barrels of oil.
When the dispute first flared up a year ago, trade between China and Japan was badly hit, with the latter's car makers suffering in particular.
Some members of the Bank of Japan's board believe it will be "difficult" for the BOJ to achieve its 2% inflation goal within two years, as pledged in April.
The minutes of the last meeting in October show that three out of nine policy makers voted against a statement which said that the bank expects inflation to hit 1.9% in FY 2015. That's up from two votes at the previous meeting.
One member believes that the rise in CPI "had already peaked, as the effects of the rapid depreciation of the yen had dissipated." There's also concern about the risks to Japan's economic outlook.
The skepticism contrasts with the optimism of BOJ Governor Haruhiko Kuroda, who just yesterday expressed confidence that the bank will meet its inflation goal, although he did acknowledge that the target is "very ambitious."
The USD-JPY is -0.2% at ¥101.46 and the Nikkei is -0.7%.