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Japan: Machinery orders record second consecutive expansion in July

September 10, 2014

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded in July for the second consecutive month, suggesting that the economy is gaining momentum after April’s sales tax hike. Headline machinery orders (private sector, excluding volatile orders) expanded 3.5% in July over the previous month in seasonally-adjusted terms, which followed the 8.8% increase recorded in June. The print, however, undershot the 4.0% increase that market analysts had expected.

Overall manufacturing orders expanded strongly, while non-manufacturing books contracted in July. In addition, export orders declined sharply in the same month.

Compared to the same month last year, core machinery orders rebounded to a 1.1% increase in July from a 3.0% contraction in June. Nevertheless, the trend continued to point downward; annual average growth in core machinery orders decreased from 9.6% in June to 9.2% in July, which represented a six-month low.

The Cabinet Office maintained its assessment of machinery orders, stating that they, “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 8.1% in 2014, which is down 0.5 percentage points over last month’s projection. In 2015, the panel sees private non-residential investment expanding 3.3%. In addition, FocusEconomics Consensus Forecast panelists expect gross fixed investment to increase 5.5% in 2014, which is up 0.1 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 July 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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