Japan Investment April 2022

Japan

Japan: Core machinery orders expands at quickest pace since October 2020 in April

June 15, 2022

Core machinery orders—which cover the private sector, exclude volatile orders and are a leading indicator for capital spending over the coming three-to-six-month period—grew 10.8% in month-on-month seasonally-adjusted terms in April, which followed March's 7.1% increase. April's reading marked the strongest expansion since October 2020 and was far better than expected by the market, which had penciled in a contraction.

On an annual basis, machinery orders rose at a quicker rate of 19.0% in April (March: +7.6% yoy), the best result since May 2015. Meanwhile, annual average machinery orders growth rose to 10.4% in April (March: +9.3%), signaling an improving trend in the sector.

April’s figure bodes positively for investment in Q2, given that it beat market expectations and was the best result since October 2020. This said, the outlook for investment in Q2 still remains negative overall due to the supply disruption caused by the war in Ukraine and Covid-19 lockdowns in China. Even though core machinery orders grew at a faster pace, order backlogs did too, expanding at the third fastest rate on record in annual terms. This suggests that investment will be stifled by supply constraints even despite strengthening demand.

FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 0.2% in 2022, which is down 0.4 percentage points over last month’s projection, and grow 2.5% in 2023.


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Japan Investment April 2022 0

Note: Month-on-month changes of seasonally adjusted core machinery orders and year-on-year growth rate in %.
Source: Ministry of Economy, Trade and Industry (METI).


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