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Japan Investment January 2021

Japan: Core machinery orders falls at sharpest rate since June 2020 in January

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—declined 4.5% month-on-month in seasonally-adjusted terms in January (December: +5.3% mom). The result marked the worst reading since June 2020.

On an annual basis, machinery orders increased 1.5% in January, which was well below December’s 11.8% expansion. Meanwhile, the trend improved slightly, with the annual average variation of machinery orders coming in at minus 8.3%, up from December’s minus 8.4%.

Looking ahead, economists at Nomura continue to be relatively optimistic regarding capital spending this year:

“Although core machinery orders may have stalled in January 2021, the fact that external demand is still holding up well has us maintaining our view that capex demand is still on a recovery trajectory.”

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