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Japan: Machinery orders take largest plunge in over 20 years

February 12, 2014

Core machinery orders (a leading indicator of capital spending over a three- to six-month period) plummeted in December, recording their largest drop since October 1992. Headline machinery orders (private sector, excluding volatile orders) plunged 15.7% over the previous month in seasonally-adjusted terms in December, which contrasted the 9.3% increase recorded in November. December's drop was well below the 4.0% contraction that market analysts had expected.

Both overall manufacturing and non-manufacturing orders recorded steep losses in December. Conversely, machinery orders from overseas, which determine future exports, rebounded strongly in the same month. Compared to the same month of the previous year, core machinery orders rose 6.7% in December. The increase was well below the 16.7% rise recorded in November and marked the lowest reading in five months. In the full year 2013, machinery orders rose 5.8%, which contrasted the 0.9% decline tallied in 2012.

Despite the sharp monthly decrease, the Cabinet Office maintained its assessment of machinery orders and stated that, "machinery orders are on an uptrend." In addition, the Office predicted a 2.9% drop in the first quarter following an expansion of 1.5% in the last quarter of 2013.

FocusEconomics Consensus Forecast panelists expect investment to rise 4.0% in 2014, which is up 0.7 percentage points over last month's projection. In 2015, the panel sees investment expanding 4.0%.


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Japan Investment December 2013

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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