* Oct core orders +0.6 pct, matching f'cast
* Data shows better chance of sustained economic recovery
* Some analysts cautious of outlook on tax hike pain
By Leika Kihara
TOKYO, Dec 11 (Reuters) - Japan's core machinery orders rose0.6 percent in October, rebounding from a fall in the previousmonth and boding well for stronger capital expenditure -- a keyelement in sustaining the current economic recovery.
The data may heighten the view that Japan's economy willaccelerate next year after weathering the pain from an increasein the sales tax hike in April.
The rise in core orders, a highly volatile series regardedas a leading indicator of capital spending, matched the medianforecast from a Reuters poll and marked a turnaround from a 2.1percent decline in the previous month.
"Corporate earnings are improving and companies have heldback on investment for so long that capex will continue torecover," said Norio Miyagawa, senior economist at MizuhoSecurities Research & Consulting.
"The positive economic cycle of export growth leading tocapital expenditure, more jobs and higher wages is working."
Compared with a year earlier, core orders increased 17.8percent, against the median estimate for a 15.0 percent gain.
Capital spending has been a weak spot in Japan as PrimeMinister Shinzo Abe struggles to spur business investment andwage increases at many companies, which remain unconvinced thathis reflationary policies will have a lasting impact.
The economy is now enjoying a temporary boost from increaseddemand ahead of an increase in sales tax, but many economistssay capital expenditure will need to grow faster next year tohelp the economy achieve self-sustaining growth.
Japanese business confidence improved in the three months toDecember and is predicted to continue rising, a Reuters pollshowed on Monday, adding to evidence of a steady recovery in theworld's third-largest economy.
The positive outcome suggests the central bank's closelywatched "tankan" quarterly survey, due out on Dec. 16, will showa continued recovery in business sentiment as the benefits ofPremier Abe's stimulus policies broaden.
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