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Japan August machinery orders seen rising slightly, current account surplus trimmed

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[October 03, 2014] By Kaori Kaneko

TOKYO (Reuters) - Japan's August core machinery orders due next week are expected to rise modestly for a third straight month, a Reuters poll found - doing little to ease fears that the government's growth-promotion policies aren't working fast enough.

A sluggish recovery in exports and a slowdown in imports - as well as a fillip from the weak yen - should probably help next week's current account balance data maintain a small surplus, the poll found.

The machinery orders and current account data will follow a recent run of weak economic figures, suggesting an expected rebound in the economy after April's sales tax hike will be smaller than previously projected.

Prime Minister Shinzo Abe is due to decide in coming months on another tax increase next year, but weak data make that decision increasingly complex.

Core machinery orders, a highly volatile data series regarded as a leading indicator of capital spending in six to nine months, were seen to have increased 0.9 percent in August from the previous month, a Reuters survey of 24 economists found.

That figure falls well short of the 3.5 percent gain recorded in July and the 8.8 percent increase in June. In May, after the sales tax rise first hit, core orders showed a record monthly decline of 19.5 percent.

"The delay in export recovery and weak factory output will have an adverse impact on firms' investment sentiment," an economist at Shinkin Central Bank said in the survey. "Although some data show corporations have solid capital spending plans for this fiscal year, there is a chance they will postpone their plans depending on the economic situation."

The poll also found core machinery orders were expected to show an annual fall of 5.1 percent in August after a 1.1 percent gain in July.

The Cabinet Office will announce the data on Oct. 9 at 8:50 a.m. (Oct. 8 at 2350 GMT).

A day before the machinery orders data is published, the finance ministry will announce the current account balance for August, which is forecast to show a surplus of 198 billion yen ($1.82 billion), according to the poll. That compared with a 416.7 billion yen surplus in July.

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"Exports remain stagnant. The trend of trade deficits is expected to continue although the deficit is unlikely to widen further due to the slow pickup in imports," said an economist at Dai-ichi Life Research Institute.

The economy shrank an annualized 7.1 percent in the second quarter, the biggest contraction since the 2009 global financial crisis, as the rise in sales tax to 8 percent from 5 percent in April hit households.

The Bank of Japan is widely expected to keep monetary settings unchanged at its two-day policy meeting ending on Tuesday, but it is likely to offer a bleaker view on industrial production, reflecting a surprise plunge in August's factory output.

(1 US dollar = 108.8000 Japanese yen)

(Editing by Eric Meijer)

[ 2014 Thomson Reuters. All rights reserved.]

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