TOKYO (Reuters) – Japanese exports fell for the fifth month in April in a sign of the growing economic strain exerted by the Sino-U.S. trade war, but a pickup in business sentiment and machinery orders show companies remain optimistic about the future.

The exports contraction followed gross domestic product (GDP) data out Monday that showed Japan’s growth unexpectedly accelerated in January-March, driven by net contributions from exports, despite declines in consumer and business spending.

Worries about overseas demand and weak consumer spending could keep policymakers under pressure to forego a twice-delayed tax hike in October, although a rebound in manufacturers’ confidence may ease some fears of a recession in the world’s third-largest economy.

Highlighting uncertainty over the outlook, about two-thirds of companies expect growth to remain flat in the second quarter, while 82% of firms believe Japan’s economy is not fully prepared for a planned tax hike, a Reuters monthly poll showed.

Investors are closely watching the government’s monthly report due later this week for a possible downgrading of its view that the economy is in a gradual recovery, which would rekindle speculation about a tax hike delay.

Ministry of Finance (MOF) data showed on Wednesday Japan’s exports fell 2.4% in April from a year earlier, down for a fifth straight month. That compared with a 1.8% drop seen by analysts in a Reuters poll.

However, data on capital expenditure offered more encouraging signs for the future. Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 3.8% in March, confounding expectations for a 0.7 percent decline.

Furthermore, manufacturers surveyed by the Cabinet Office forecast core orders to jump 15.7% in April-June after a 3.2% decline in the previous quarter.

Easing concerns about the outlook, the Reuters Tankan poll, which tracks the Bank of Japan’s (BOJ) closely-watched tankan business survey, found the sentiment index for manufacturers rose to 12 in May, the first improvement in seven months.

The index is expected to rise further to 15 in August.

In Japan, the previous sales tax increase to 8% from 5% in April 2014 hit consumers hard and triggered a sharp economic slump.

Since then Abe has delayed the planned tax hike to 10% twice as he prioritized economic growth over fiscal reforms, despite the industrial world’s heaviest public debt burden, which sits at twice the size of Japan’s $5 trillion economy.

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