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Japan: Machinery orders rebound in June following May's record plunge

August 14, 2014

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) rebounded in June after recording the sharpest drop on record in May. Headline machinery orders (private sector, excluding volatile orders) expanded 8.8% over the previous month in seasonally-adjusted terms in June, which contrasted the 19.5% contraction recorded in May but undershot the 15.3% increase that market analysts had expected.

Both overall manufacturing orders and non-manufacturing rebounded in June, while export orders expanded a healthy 62.8% in the same month.

Compared to the same month last year, core machinery orders contracted 3.0% in June. The decline followed the 14.3% drop tallied in May, which had marked a multi-year low. Consequently, the trend continues to point downward; annual average growth in core machinery orders decreased from 10.4% in May to 9.6 in June, which represented a five-month low.

As a result of the weaker-than-expected rebound, the Cabinet Office downgraded its assessment of machinery orders for the second consecutive month, stating that, “machinery orders are seesawing.” That said, businesses surveyed by the Cabinet Office predict that there will be a 2.9% increase in the third quarter, contrasting the 10.4% drop in the second quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 8.6% in 2014, which is down 0.4 percentage points over last month’s projection. In 2015, the panel sees private non-residential investment expanding 3.4%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 5.4% in 2014, which is up 0.2 percentage points over last month’s projection. In 2015, the panel sees gross fixed investment growth at 1.2%.


Author: Ricard Torné, Lead Economist

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Japan Investment June 2014 0

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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