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Japan Investment June 2018

Japan: Machinery orders drop sharply in June

Core machinery orders, a leading indicator for capital spending over a three- to six-month period, contracted at a steeper-than-expected pace in June. This suggests that capital expenditure is likely to lose steam further down the road. Headline machinery orders (private sector, excluding volatile orders) fell 8.8% in June from the previous month in seasonally-adjusted terms, down from the 3.7% drop in May, and well below the 1.0% decrease expected by market analysts.

A broad-based drop in demand drove the result, with both manufacturing and non-manufacturing orders contracting. Overseas demand also fell as export orders contracted at a double-digit pace in June.

Compared to the same month of the previous year, growth in core machinery orders came to a virtual standstill. In June, year-on-year growth came in at 0.3%, notably down from May’s 16.5% expansion. The annual average variation in core machinery orders, nevertheless, rose from 0.8% in May to 1.3% in June.

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