Meanwhile, the deficit in Japan's current account likely widened in November from the previous month, according to the survey, but economists say the balance should quickly return to a surplus due to income from Japan's hefty overseas investments.

Wholesale prices are also likely to rise at a healthy pace in December, indicating that the economy is firmly on track to expand further and meet the Bank of Japan's 2 percent inflation target.

"Factories are increasing output and running closer to full capacity, which sets the stage for accelerated business investment in the first quarter," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co.

"There's not much for the government or the Bank of Japan to worry about now."

Japan's core machinery orders likely rose 1.2 percent in November from the previous month, according to a Reuters survey of 26 economists. That would be faster than a 0.6 percent increase in the October.

Compared with a year earlier, core orders, a highly volatile data series regarded as a leading indicator of capital spending, likely increased 12.1 percent, according to the survey.

The Cabinet Office will release the data on January 16 at 8:50 a.m. (January 15 at 2350 GMT).

Many officials in the government and the central bank view capital expenditure as an essential component of economic growth because it can spur job creation, which could lead to higher wages and stronger consumer spending.

Companies were slow to expand investment last year, so evidence that capital expenditure will grow this year would be a positive for the economic outlook.

The corporate goods price index, which measures the price companies charge each other for their goods, likely rose a median 2.6 percent in December from a year ago, according to the survey.

That would be slightly slower than a 2.7 percent annual increase in November but still offer evidence that inflationary pressures are building in the economy.

The BOJ will release the corporate goods price index at the same time as machinery orders.

Data due a day earlier on the current account is expected to show that the deficit stood at 380.4 billion yen ($3.63 billion) in November, larger than a 127.9 billion yen deficit in November.

A widening in the trade deficit is expected to weigh on the current account balance as a weak yen pushes up the value of imports, economists say.

However, the current account is expected to easily return to surplus as Japan traditionally repatriates a lot of money from a large selection of corporate assets and investments held overseas.

Japan passed the halfway mark towards its 2 percent inflation goal in November as prices rose the most in five years, while regular wages halted 17 months of declines, underlining progress on two key fronts to revitalise the economy.

Growth is likely to continue this year due to strong domestic demand, but economists still doubt whether the BOJ can meet its inflation target in the two-year timeframe that it outlined in an overhaul of monetary policy last year. ($1 = 104.7850 Japanese yen)

(Editing by Kim Coghill)

By Stanley White