Japan core machinery orders point to capex recovery ahead

Humanoid robots work side by side with employees in the assembly line at a factory of Glory Ltd., a manufacturer of automatic change dispensers, in Kazo, north of Tokyo, Japan in July 1, 2015.
Humanoid robots work side by side with employees in the assembly line at a factory of Glory Ltd., a manufacturer of automatic change dispensers, in Kazo, north of Tokyo, Japan in July 1, 2015. PHOTO: REUTERS

TOKYO (REUTERS) - Japanese machinery orders rose more than expected in June in a sign that companies are gradually becoming more willing to increase capital expenditure, which is essential to drive growth in the world's third-largest economy.

Companies also expect core machinery orders, a leading indicator of capital expenditure, to rise in July-September, suggesting that business investment is starting to stabilise after a rocky performance in the previous quarter.

Prime Minister Shinzo Abe has compiled a stimulus package that focuses on infrastructure, which should support capital spending heading into next year, but risks remain that overseas economic turmoil could curb business investment.

Core machinery orders rose 8.3 per cent, well ahead of the median estimate for a 3.1 per cent increase, Cabinet Office data showed on Wednesday (Aug 10).

Manufacturers' orders rose 17.7 per cent, while orders from the services sector rose 2.1 per cent, the data showed.

Manufacturers surveyed by the Cabinet Office forecast that core orders will rise 5.2 per cent in July-September, which compares with a 9.2 per cent decrease in April-June.

Mr Abe's cabinet last week approved an economic stimulus package with 13.5 trillion yen (S$178.07 billion) in fiscal measures as a precaution in case Britain's exit from the European Union leads to global economic turmoil.