Japan Investment January 2016

Japan

Japan: Growth in machinery orders soars at the outset of the year

March 14, 2016

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded for the second consecutive month, with January marking the strongest expansion since 2003. This situation suggests that capital expenditure remains resilient despite a challenging economic environment. Headline machinery orders (private sector, excluding volatile orders) rose 15.0% in January over the previous month in seasonally-adjusted terms, which followed the 1.0% increase recorded in December. Moreover, the increase was above the 1.7% expansion that market analysts had expected.

Overall manufacturing orders expanded a whopping 41.2% in January, while growth in non-manufacturing books eased slightly. Against a backdrop of softening global demand, export orders declined at the fastest pace in 18 months.

Compared to the same month of the previous year, core machinery orders rose 8.4% in January, which contrasted the 3.6% increase tallied in the previous month. As a result of January’s surge, the trend now points upward, with annual average growth in core machinery orders rising from December’s 4.1% to 4.5%.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 2.4% in 2016, which is up 0.4 percentage points over last month’s projection. In 2017, the panel sees private non-residential investment expanding 1.9%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 1.6% in 2016, which is up 0.1 percentage points over last month’s projection. In 2017, the panel sees gross fixed investment growth at 1.2%.


Author: Ricard Torné, Lead Economist

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Japan Investment January 2016

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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