Japan's Dec machinery orders fall steeply

TOKYO • Japan's core machinery orders tumbled in December at the fastest pace in more than three years and companies expect orders to rise only marginally in the January-March period, raising concerns that recent gains in capital expenditure may taper off.

The 11.9 per cent decline in December core orders, the largest fall since May 2014, was more than the median estimate of a 2.3 per cent fall and followed a 5.7 per cent increase in November.

The machinery orders come a day after gross domestic product data for the October-December period showed capital expenditure had risen for five consecutive quarters, although the last quarter's modest 0.7 per cent undershot the median estimate for a 1.1 per cent rise and now suggests this run of gains may not continue at the same pace. Core machinery orders are regarded as an indicator of capital investment six to nine months ahead.

Economists say Japan's economy can continue to grow thanks to the strength in consumer spending and exports, but they also note that consumer prices, not business investment, will ultimately determine whether the Bank of Japan's bold experiment to generate inflation succeeds.

"Capital expenditure will not accelerate, but at the same time, I don't expect it to start falling," said Mr Norio Miyagawa, senior economist at Mizuho Securities.

"Business investment can continue to grow gradually, because companies have ample profits. The economy is not stuttering."

Companies surveyed by the Cabinet Office forecast that core orders, which exclude those for ships and from electric power utilities, will rise only 0.6 per cent in January-March after a 0.1 per cent decrease in October-December.

Orders from manufacturers tumbled 13.3 per cent month on month in December, the largest decline since February 2016. That followed a 0.2 per cent decline in the previous month.


A version of this article appeared in the print edition of The Straits Times on February 16, 2018, with the headline 'Japan's Dec machinery orders fall steeply'. Subscribe