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Japan: Machinery orders record largest expansion in nearly 20 years in March

May 19, 2014

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) soared in March, marking the largest expansion since October 1996 and suggesting that business investment remains solid despite the April sales-tax hike. Headline machinery orders (private sector, excluding volatile orders) jumped 19.1% over the previous month in seasonally-adjusted terms in March, which contrasted the 4.6% decrease recorded in February and overshot the 5.8% increase that market analysts had expected.

Both overall manufacturing and non-manufacturing orders rebounded strongly in March, with overall manufacturing books recording the largest increase since June 2006. Machinery orders from overseas, which determine future exports, accelerated slightly in the same month. Compared to the same month last year, core machinery orders increased 16.1% in March. The expansion was above the 10.8% rise recorded in February. The trend continues to point upward; annual average growth in core machinery orders rose from 9.7% in February to 11.5% in March, which marked the highest level since May 2001.

As a result of the monthly expansion, the Cabinet Office upgraded 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 1.1 percentage points over last month’s projection. In 2015, the panel sees private non-residential investment expanding 4.0%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 3.8% in 2014, which is up 0.2 percentage points over last month’s projection. In 2015, the panel sees gross fixed investment growth at 1.5%.


Author: Ricard Torné, Lead Economist

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Japan Investment March 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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