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Japan: Machinery orders contract in January

March 11, 2015

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) contracted in January for the first time in three months. Headline machinery orders (private sector, excluding volatile orders) fell 1.7% in January over the previous month in seasonally-adjusted terms, which contrasted the 8.3% increase recorded in December. The print, however, was less than market analysts’ forecasts for a 4.1% drop.

Overall manufacturing orders recorded the largest drop in eight months, while growth in non-manufacturing books decelerated in January. Export orders recovered strongly partially due to the deprecation of the yen.

Compared to the same month of last year, core machinery orders rose 1.9% in January, which marked a sharp slowdown over the 11.4% increase tallied in the previous month. As a result, the trend continued to point downward; annual average growth in core machinery orders decreased from 4.0% in December to 2.7% in January, which represented a 16-month low.

Despite the deterioration observed in January, the Cabinet Office maintained 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 1.6% in 2015, which is unchanged over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.8%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to drop 0.1% in 2015, which is down 0.1 percentage points over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.7%.


Author: Ricard Torné, Head of Economic Research

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Japan Investment January 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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