Japan Investment


Machinery orders deteriorate in June

Core machinery orders, a leading indicator of capital spending over a three- to six-month period, deteriorated in June following the large increase registered in May. Headline machinery orders (private sector, excluding volatile orders) contracted a seasonally adjusted 2.7% over the previous month, contrasting the 10.5% surge tallied in May. However, the print was above the 7.0% decrease market analysts had expected.

Moreover, both overall manufacturing orders and non-manufacturing books decreased in June, while machinery orders from overseas, which determine future exports, also registered a contraction.

Compared to the same month last year, core machinery orders rose 4.9% in June, which was below the 16.5% jump recorded in the previous month. The trend continues to point upwards, with annual average growth in core machinery orders rising from minus 2.5% in May to minus 1.1% in June.

Notwithstanding the monthly drop, the Cabinet Office revised its assessment on machinery orders upward slightly, stating that, "machinery orders are picking up moderately," instead of saying that they are, "showing signs of moderately picking up." The Office reported a 6.8% growth in machinery orders for the second quarter, which is the largest quarterly gain since Q3 2008, just before the global crisis began to have an impact. In contrast, the Office predicts a 5.3% drop in the third quarter.

FocusEconomics Consensus Forecast panellists expect investment to fall 0.4% in 2013, which is up 0.2 percentage points over the previous month's projection. In 2014, the panel sees investment expanding 3.1%.

Author:, Economist

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Japan Investment Chart

Japan Investment June 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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