Japan Investment


Machinery orders contract in September

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) contracted for the first time in three months, suggesting that the government is failing to prop up business investment. Headline machinery orders (private sector, excluding volatile orders) fell 2.1% over the previous month in seasonally-adjusted terms, contrasting the 5.4% expansion in August. The decline exceeded the 1.8% drop that market analysts had expected.

Overall manufacturing orders accelerated in September, whereas non-manufacturing books experienced a sharp contraction. Machinery orders from overseas, which determine future exports, continued to expand, albeit at a slower pace.

Compared to the same month last year, core machinery orders rose 11.4% in September, which was above the 10.3% rise recorded in the previous month. The trend continues to point upward; annual average growth in core machinery orders rose from 0.5% in August to 2.5% in September.

The Cabinet Office maintained its assessment on machinery orders and stated that, "machinery orders are picking up." In addition, the Office predicted a 2.1% drop in the fourth quarter, following an expansion of 4.3% in the third quarter.

FocusEconomics Consensus Forecast panelists expect investment to decline 0.1% in 2013, which is down 0.2 percentage points over last month's projection. In 2014, the panel sees investment expanding 3.5%, which is up 0.3 percentage points from last month's estimate.

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Japan Investment Chart

Japan Investment September 2013

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) and FocusEconomics calculations.

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