Japan Investment


Japan: Machinery orders nosedive in May

July 9, 2012

Machinery orders, a leading indicator of capital spending over a three to six month period, deteriorated markedly as the global slowdown is dampening appetite for business investment. In May, core machinery orders (private sector, excluding volatile orders) plummeted a seasonally adjusted 14.8% over the previous month, which contrasted the robust 5.7% rise recorded in April. The print undershot market expectations that had orders falling a softer 2.6% and marked the sharpest contraction since October 2001. Both non-manufacturing and manufacturing orders dropped sharply in May, while machinery orders from overseas, which determine future exports, rose for the second consecutive month. Automobiles bookings, on the other hand, rose 18.4%. Compared to the same month last year, core machinery orders rose 1.0% in May, which was well below the 6.6% rise observed in April. As a result, the trend is pointing downwards, with annual average growth in core machinery orders falling from 6.8% in April to 6.1% in May. Despite the disappointing May result, the Cabinet Office still maintained its assessment on machinery orders, envisaging "a gradual increasing trend". The Office predicts a 2.5% expansion in the second quarter, after the 0.9% rise posted in the first three months of the year.


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