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Japan: Growth in machinery orders quickens in April

June 10, 2015

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded for the second consecutive month in April and marked a four-month high, thereby signaling that businesses are boosting investment in anticipation of stronger growth in the near future. Headline machinery orders (private sector, excluding volatile orders) expanded 3.8% in April over the previous month in seasonally-adjusted terms, which followed the 2.9% increase recorded in March. The result contrasted the 1.5% decrease that market analysts had expected.

While overall manufacturing orders expanded strongly in April, non-manufacturing books declined slightly in the same month. Export orders contracted again in April, suggesting that the positive impact of a weak currency may have started to fade.

Compared to the same month of last year, core machinery orders rose 3.0% in April, which marked a slight acceleration over the 2.6% increase tallied in the previous month. The trend continued to point downward, with annual average growth in core machinery orders swinging from plus 0.8% in March to minus 0.2% in April, which represented a 21-month low.

The Cabinet Office raised its assessment on machinery orders, stating that, “they are picking up,” compared to its previous view that orders were, “showing a gradual recovery.” Businesses surveyed by the Cabinet Office predict that there will be a sharp 7.4% decline in the second quarter, contrasting the 6.3% increase tallied in the first quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.0% in 2015, which is down 0.1 percentage points over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.9%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to drop 0.2% in 2015, which is unchanged over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.8%.


Author: Ricard Torné, Lead Economist

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Japan Investment April 2015

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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