Japan Core machinery orders down 7.9% in June

Aug 14, 2015

Core private-sector machinery orders fell a seasonally adjusted 7.9 percent in June from the previous month, for the first decline in four months, the government said Thursday. The fall signaled a possible dent in corporate investment demand.

The value of orders, widely regarded as a leading indicator of future capital spending, totaled ¥835.9 billion. The orders exclude those for ships and from utilities because of their volatility.

The government maintained its basic assessment, saying orders have been “picking up,” reflecting a rising trend in which orders climbed 2.9 percent in the April-June period from the previous quarter for the fourth straight quarterly growth, a government official said.

The Cabinet Office estimates core orders will rise 0.3 percent in the three months through September.

But Miyuki Kiso, market economist at Mizuho Securities Co., said there is more risk of a downturn in corporate investment, amid slowing overseas economies including China, where the central bank weakened the yuan for the third consecutive day on Thursday.

“China is considered to be a major risk,” said Kiso. “The fact that the Chinese authorities had to move to devalue the yuan can be considered as a reflection of weakening fundamentals.”

As for domestic demand, Kiso said much corporate investment is for maintenance and repair and there are few moves to boost production capacity. The latter contributes to growth.

The figures are being closely watched as Prime Minister Shinzo Abe’s government sees business investment — which accounts for around 15 percent of gross domestic product — as a pillar of economic growth.

Orders from the manufacturing sector plunged 14.0 percent to ¥379.7 billion in June, while those from the nonmanufacturing sector gained 0.6 percent to ¥477.9 billion.

In the manufacturing sector, orders from industries such as steel products contributed to the decline following large orders in the previous month, while those from electrical machinery and food product sectors increased.

Total orders, including those from the domestic public sector and abroad, increased 5.0 percent to ¥2.42 trillion.

Overseas demand for Japanese machinery, an indicator of future exports, surged 20.3 percent to ¥1.07 trillion, due chiefly to large orders for such products as boilers and turbines.

Source: The Japan Times

Chart source: tradingeconomics.com