Japan Investment August 2020


Japan: Core machinery orders growth loses pace in August

October 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—grew 0.2% month-on-month in seasonally-adjusted terms in August, which was a marked deterioration from July's 6.3% increase. However, the print came in above market expectations of a 1.0% fall in orders.

On an annual basis, machinery orders plunged 15.2% in August, a smaller decrease than July’s 16.2% fall and marked the best result since March. Meanwhile, annual average variation of machinery orders was unchanged at July's 7.4% in August.

Regarding August’s reading, economists at Nomura commented:

“We think that the weakness in orders from non-manufacturers reflects stalled recoveries, particularly in areas such as consumer spending, owing to a further rise in COVID-19 cases in Japan from July. On the other hand, the number of new COVID-19 cases in the West in Jul-Aug was lower than before, and data such as manufacturing PMI readings have shown a recovery in overseas economies. While orders from manufacturers should also reflect overseas economic recoveries, we think that uncertainties about the Japanese economy may have had a stronger impact.”

FocusEconomics Consensus Forecast panelists project gross fixed investment to grow 2.3% in 2021, which is down 0.2 percentage points from last month’s estimate, and increase 2.0% in 2022.

Author:, Economist

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Japan Investment August 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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