Japan Investment


Machinery orders contract most in over four years

Core machinery orders, a leading indicator of capital spending over a three to six-month period, deteriorated sharply in April, falling at the fastest pace since January 2009. Headline machinery orders (private sector, excluding volatile orders) plummeted a seasonally adjusted 8.8% over the previous month, contrasting the 14.2% rise tallied in March, which had marked the fastest increase in over 10 years. In addition, the print exceeded the 8.1% drop anticipated by market analysts.

In addition, both overall manufacturing orders and non-manufacturing books contracted sharply in April, while machinery orders from overseas, which determine future exports, registered the largest drop seen in over a year.

Compared to the same month last year, core machinery orders fell 1.1% in April, after rising 2.4% in March. As a result of the sharp decline seen in May, the trend now points downwards, with annual average growth in core machinery orders falling from minus 3.0% in March to minus 3.6% in April.

Despite the monthly fall, the Cabinet Office maintained its assessment on machinery orders stating that "there are signs of a moderate pick-up". The Office predicts a 1.5% drop in the second quarter, which is below the flat reading recorded in the first three months of the year.

FocusEconomics Consensus Forecast panellists expect investment to rise 0.1% in 2013, which is down 0.4 percentage points over the previous month's projection. In 2014, the panel sees investment expanding 2.9%.

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Japan Investment Chart

Japan Investment April 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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