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Japan: Machinery orders recede in April following March's record surge

June 12, 2014

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) dropped in April, following March’s surge, which had represented the largest expansion since October 1996. Headline machinery orders (private sector, excluding volatile orders) fell 9.1% over the previous month in seasonally-adjusted terms in April, which contrasted the 19.1% expansion recorded in March and came in above the 10.8% decline that market analysts had expected.

Overall manufacturing orders recorded the largest drop in 15 months, while non-manufacturing books slowed markedly in April. Machinery orders from overseas, which determine future exports, soared to the highest level in over five years in the same month. Compared to the same month last year, core machinery orders increased 17.6% in April. The expansion was above the 16.1% increase recorded in March. The trend continues to point upward; annual average growth in core machinery orders rose from 11.5% in March to 13.0% in April, which marked the highest level since 2001.

Meanwhile, the Cabinet Office maintained its assessment of machinery orders, stating that, “they are in a rising trend.” In addition, the Office predicts that there will be a 0.4% increase in the second quarter following the 4.2% expansion in the first quarter.

FocusEconomics Consensus Forecast panelists expect private non-residential investment to rise 6.1% in 2014, which is up 2.3 percentage points over last month’s projection. In 2015, the panel sees private non-residential investment expanding 3.8%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 4.1% in 2014, which is up 0.5 percentage points over last month’s projection. In 2015, the panel sees gross fixed investment growth at 1.4%.


Author: Ricard Torné, Head of Economic Research

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Japan Investment April 2014

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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