Tokyo - Japan's key machinery orders unexpectedly rose for the first time in five months in February, giving rise to hopes for a recovery in capital spending and an easing of the recession.

Machinery orders increased 1.4 per cent from January to 728.1 billion yen (7.28 billion dollars) on the back of an unexpected recovery in orders from the non-manufacturing sector, the government said.

The increase was better than the average market expectation for an 8.1-per-cent fall and caused stocks to rise.

The government also revised its assessment on machinery orders upward for the first time since May 2007 but said it remained cautious about the recovery of the nation's economy as overseas machinery orders and orders in the manufacturing sector were still low.

In January, machinery orders in the world's second-largest economy hit their lowest level in 22 years on a fall in exports.

To revive the economy, the government plans to propose the largest-ever supplementary budget of 15 trillion yen for its third economic stimulus package since the fall.

Overseas machinery demand, an indicator of future Japanese exports, shrank 22.9 per cent from January and 74.3 per cent on a year-on-year basis to a record low of 296.5 billion yen.

Orders from manufacturers dipped 8.1 per cent from January to 202.5 billion yen while orders from non-manufacturers grew 3.3 per cent to 521.8 billion yen.

Core private-sector machinery orders, which exclude those for ships and from electrical utilities, are regarded as a leading indicator of corporate capital spending about six months ahead. (dpa)