Japan Investment September 2020


Japan: Core machinery orders edge down in September

November 12, 2020

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—fell 4.4% on a month-on-month in seasonally-adjusted terms in September, which contrasted August's 0.2% increase.

On an annual basis, machinery orders dropped 11.5% in September, a milder decrease than August’s 15.2% fall and the best result since March. Meanwhile, the trend pointed down, with the annual average variation of machinery orders coming in at minus 9.0% in September, down from August's minus 7.4%.

September’s report also included machinery manufacturers’ forecasts for October–December 2020, which projects a 1.9% decline in core machinery orders over the period. The spike in Covid-19 cases in Europe and the U.S. in recent months likely weighed on the outlook.

Regarding September’s reading, economists at Nomura commented:

“We think a resurgence in COVID-19 cases in Japan from July led to weakness in orders from non-manufacturers. On the other hand, the number of new COVID-19 cases in the West in Jul-Sep was, generally speaking, lower than before, and data such as manufacturing PMI readings have shown a recovery in overseas economies. We think these differences in degree of economic recovery between Japan and elsewhere are reflected in the machinery order data.”

FocusEconomics Consensus Forecast panelists project gross fixed investment to grow 2.0% in 2021, which is down 0.3 percentage points from last month’s estimate, and increase 2.0% in 2022.

Author:, Economist

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Japan Investment Chart

Japan Investment September 20 20 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) and FocusEconomics calculations.

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