Japan Investment May 2017


Japan: Machinery orders contract again in May

July 10, 2017

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) declined for the second consecutive month in May, casting doubts about the strength of firms’ capital spending. As a result, the Cabinet downgraded its basic assessment on machinery orders, stating that orders had come to a standstill. Headline machinery orders (private sector, excluding volatile orders) fell 3.6% in May from the previous month in seasonally adjusted terms, which followed the 3.1% decrease in April. The print contrasted the 1.7% increase that market analysts had expected.

Growth in overall manufacturing orders decelerated in May, while non-manufacturing books contracted sharply. Export orders declined in May, following April’s surge.

Compared to the same month of the previous year, core machinery orders rose 0.6% in May, which followed the 2.7% increase in April. The annual average variation in core machinery orders rose from 1.4% in April to 2.3% in May.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 3.3% in 2017, which is up 0.6 percentage points over last month’s projection. In 2018, the panel sees private non-residential investment expanding 2.1%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 2.3% in 2017, which is unchanged over last month’s projection. In 2018, the panel sees gross fixed investment growth at 1.6%.

Author: Ricard Torné, Lead Economist

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Japan Investment May 2017

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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