Japan's core machinery orders rose in October for the first time in three months as service sector firms ramped up investment amid low COVID-19 infections, a welcome sign firms were spending and the broader economy was recovering.

The world's third-largest economy is set to post a solid rebound this quarter after a larger-than-expected contraction in July-September, although the outlook is currently blurred by uncertainties around the new omicron coronavirus variant.

Core machinery orders, a highly volatile leading indicator of capital spending in the coming six to nine months, rose 3.8% in October from the previous month, the Cabinet Office data showed on Monday.

That compared with a 2.1% expansion forecast by economists in a Reuters poll and followed no change in September.

Core orders from service-sector firms excluding ships and electrical utilities gained 16.5% month-on-month in October, led by transport and postal services that grew 170.1% due to large-scale orders for railroad vehicles.

"As the coronavirus outbreak settled down, capital expenditure among a broad range of non-manufacturers grew," a government official told reporters.

Meanwhile, orders from manufacturers declined 15.4% from a month earlier, as decreasing demand from chemical firms offset growth from semiconductor-making equipment and production machinery companies.

In a year-on-year basis, core orders rose 2.9% in October, the data showed, versus a 4.0% rise expected by economists.

Companies' capital expenditure slowed in the third quarter due to a global resurgence of COVID-19 outbreak, which particularly battered carmakers and other manufacturers dependent on parts supplies from Asian factories.