Japan Investment November 2020


Japan: Core machinery orders growth eases in November

January 14, 2021

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—grew 1.5% in month-on-month seasonally-adjusted terms in November, which followed October's stellar 17.1% increase.

On an annual basis, machinery orders plummeted 11.3% in November, contrasting October’s 2.8% expansion. Moreover, the trend pointed down, with the annual average variation of machinery orders coming in at minus 9.6% in November, down from October's minus 8.4% reading.

Looking ahead, economists at Nomura see significant uncertainty regarding capital expenditures heading into 2021:

“We have our doubts about whether these high order levels seen in October and November are sustainable. Covid-19 cases headed up more rapidly again from October in Europe and the US, and Japan was also hit by a third wave in November. In January 2021, the government declared a state of emergency in 11 prefectures. This has put downward pressure on economic activity, and it looks increasingly likely that corporate capex could temporarily weaken too. We therefore think real capex growth in 2021 H1 is likely to be low. We urge caution regarding the outlook, however, as machinery orders through November suggest that capex could be higher than we currently expect.”

FocusEconomics Consensus Forecast panelists project gross fixed investment to grow 1.9% in 2021, which is up 0.1 percentage points from last month’s estimate, and increase 2.5% in 2022.

Author:, Economist

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Japan Investment November 20 20

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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