Japan Investment May 2016


Japan: Machinery orders decline again in May

July 11, 2016

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) declined for the second consecutive month in May, signaling that the strengthening of the yen is not boding well for capital expenditure. Headline machinery orders (private sector, excluding volatile orders) fell 1.4% in May over the previous month in seasonally-adjusted terms, which followed the 11.0% decrease recorded in April. That said, the drop was above the 3.2% decrease that market analysts had expected.

Both overall manufacturing orders and non-manufacturing books contracted in May, albeit at a softer pace than April’s decrease. Export orders declined in May at the fastest rate in four months.

Compared to the same month of the previous year, core machinery orders fell 11.7% in May. The print followed the 8.2% decrease tallied in the previous month and marked an 18-month low. As a result of May’s drop, the trend deteriorated further, with annual average growth in core machinery orders falling down from April’s 3.2% to 1.0%.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 0.9% in 2016, which is down 0.4 percentage points over last month’s projection. In 2017, the panel sees private non-residential investment expanding 1.8%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 0.3% in 2016, which is down 0.4 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 May 2016 1

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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