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Japan: Growth accelerates to six-month high in December

February 12, 2015

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded in December at the fastest pace in six months, thereby suggesting that investment will support the recovery of Japan’s recession-hit economy. Headline machinery orders (private sector, excluding volatile orders) rose 8.3% in December over the previous month in seasonally-adjusted terms, which followed the 1.3% increase recorded in November. The print overshot market analysts’ forecasts for an increase of 2.4%.

Overall manufacturing orders expanded strongly, recording the fastest growth since 2006, while non-manufacturing books accelerated in December. Export orders, however, contracted again in December.

Compared to the same month of the previous year, core machinery orders rose 11.4% in December, which largely contrasted the 14.6% decrease tallied in the previous month. December’s print marked the fastest pace of expansion since April 2014. In the full year 2014, core machinery orders expanded 4.0%, which was below the 5.8% increase tallied in 2013.

As a result of the improvement observed in December, the Cabinet Office revised upward its assessment of machinery orders, stating that, “they are in a gradual recovery.” Businesses surveyed by the Cabinet Office predict that there will be a 1.5% increase in the first quarter, following the 0.4% increase tallied in the fourth quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.8% in 2015, which is down 0.3 percentage points over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.4%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 0.7% in 2015, which is down 0.1 percentage points over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.1%.


Author: Ricard Torné, Head of Economic Research

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Japan Investment December 2014

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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