Japan Investment April 2016


Japan: Machinery orders decline at fastest pace in nearly two years in April

June 9, 2016

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) declined at the sharpest pace since November 2014 in April, signaling not only that the Kumamoto earthquakes in April had a remarkable impact on capital expenditure but also that business investment will likely remain weak throughout this year. Headline machinery orders (private sector, excluding volatile orders) fell 11.0% in April over the previous month in seasonally-adjusted terms, which contrasted the 5.5% increase recorded in March. Moreover, the drop exceeded the 2.3% decrease that market analysts had expected.

Overall manufacturing orders dipped into negative territory in April, while the decline in non-manufacturing books contracted at a softer pace. Export orders declined in April following March’s strongest expansion in five months.

Compared to the same month of the previous year, core machinery orders fell 8.2% in April, which contrasted the 3.2% increase tallied in the previous month. As a result of April’s drop, the trend now points downward, with annual average growth in core machinery orders edging down from March’s 4.1% to 3.2%.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.3% in 2016, which is down 1.1 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 0.7% in 2016, which is down 0.6 percentage points over last month’s projection. In 2017, the panel sees gross fixed investment growth at 0.9%.

Author: Ricard Torné, Lead Economist

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Japan Investment April 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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