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Japan: Machinery orders rebound in March

May 18, 2015

Although core machinery orders (a leading indicator of capital spending over a three- to six-month period) rebounded in March, analysts warn that capital spending remains weak. Headline machinery orders (private sector, excluding volatile orders) expanded 2.9% in March over the previous month in seasonally-adjusted terms, which contrasted the 1.4% decline recorded in February (previously reported: -0.4% month-on-month). The result was stronger than the 1.5% increase that market analysts had expected.

While overall manufacturing orders rebounded timidly in March, non-manufacturing books recorded a healthy expansion in the same month. Export orders contracted sharply in March, suggesting that the positive impact of a weak yen may have started to fade.

Compared to the same month of last year, core machinery orders rose 2.6% in March, which marked a deceleration over the 5.9% increase tallied in the previous month. The trend continued to point downward, with annual average growth in core machinery orders falling from 2.4% in February to 0.8% in March, which represented a 19-month low.

The Cabinet Office maintained its assessment on machinery orders, stating that, “they are in a gradual recovery.” Businesses surveyed by the Cabinet Office predict that there will be a sharp 7.4% decline in the second quarter, contrasting the 6.3% increase tallied in the first quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 1.0% in 2015, which is down 0.1 percentage points over last month’s projection. In 2016, the panel sees private non-residential investment expanding 2.9%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to drop 0.2% in 2015, which is unchanged over last month’s projection. In 2016, the panel sees gross fixed investment growth at 1.8%.


Author: Ricard Torné, Lead Economist

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Japan Investment March 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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