Japan Investment September 2022

Japan

Japan: Decline in core machinery orders softens in September

November 16, 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—decreased 4.6% in month-on-month seasonally -adjusted terms in September, which was a smaller drop than August's 5.8% decrease.

On an annual basis, machinery orders rose at a more moderate pace of 2.9% in September (August: +9.7% yoy), the worst result since October 2021. Moreover, the trend pointed down, with the annual average growth of machinery orders coming in at 7.8% in September, down from August's 8.7%.

September’s print means that core machinery orders fell 1.6% in Q3 as a whole in sequential terms. The statistical release also provided an official forecast for growth of core machinery orders in Q4. It forecast that core machinery orders would rise 3.6%.

Analysts at Nomura commented on the investment outlook:

“We forecast 0.6% q-q growth in real capex in the Oct–Dec 2022 GDP statistics and thus expect another quarter of q-q growth […]. Economic slowdown overseas is still cause for concern, but we forecast that economic reopening and easing of supply constraints will push up capex going forward. We think the Oct–Dec machinery order outlooks are consistent with our view on capex.”

September’s print means that core machinery orders fell 1.6% in Q3 as a whole in sequential terms. The statistical release also provided an official forecast for growth of core machinery orders in Q4. It forecast that core machinery orders would rise 3.6%.

Analysts at Nomura commented on the investment outlook:

“We forecast 0.6% q-q growth in real capex in the Oct–Dec 2022 GDP statistics and thus expect another quarter of q-q growth […]. Economic slowdown overseas is still cause for concern, but we forecast that economic reopening and easing of supply constraints will push up capex going forward. We think the Oct–Dec machinery order outlooks are consistent with our view on capex.”

FocusEconomics Consensus Forecast panelists expect gross fixed investment to grow 2.1% in 2023, which is down 0.5 percentage points over last month’s projection, and 2.3% in 2024.


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Japan Investment September 2022

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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