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Japan: Machinery orders contract again in February

April 13, 2015

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) contracted in February for the second consecutive month, suggesting that business investment remains subdued. Headline machinery orders (private sector, excluding volatile orders) fell 0.4% in February over the previous month in seasonally-adjusted terms, which followed the 1.7% decline recorded in January. The contraction, however, was softer than market analysts’ forecasts for a 2.8% drop.

Overall manufacturing orders rebounded timidly in February, while non-manufacturing books recorded the largest drop in four months. Export orders expanded for the second consecutive month partially due to the deprecation of the yen.

Compared to the same month of last year, core machinery orders rose 5.9% in February, which marked an acceleration over the 1.9% increase tallied in the previous month. The trend, however, continued to point downward, with annual average growth in core machinery orders falling from 2.7% in January to 2.4% in February, which represented an 18-month low.

The Cabinet Office maintained its assessment on 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 1.0% 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 February 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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