Despite Drop in Machinery Orders, Japan's Capex Trend Remains Solid -- Update
By Takashi Mochizuki
TOKYO--Japanese machinery orders fell in April from the previous month, but the drop was smaller than expected and economists remain optimistic about the nation's corporate capital investment trend.
Policy makers are hoping that capital expenditure will remain relatively robust to help support the economy amid concern that a drop in consumption in the wake of a sales tax increase might derail the Abe administration's efforts to boost the economy with its pro-growth policies known as Abenomics.
Core machinery orders fell 9.1% in April from a month ago, the Cabinet Office said Thursday. The outcome was better than an 11.0% drop expected by economists polled by The Wall Street Journal and the Nikkei.
Machinery orders, though often volatile, are widely regarded as a leading indicator of corporate capital investment. The core figure excludes orders from electric power companies and those for ships because of their large size and volatility.
The drop in orders from the previous month was nothing worrisome, economists say, because the data surged in March due to many one-time orders.
"This month's outcome is nothing negative when judging the economy's midterm trend," said Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting.
Mr. Miyagawa said the Thursday outcome confirmed Japan's capital expenditure trend "is strong."
Many analysts say that Japan's economy is holding up well after the sales tax increase in April, despite widespread fears earlier this year that the higher rate might dent consumer spending and disturb the economy's path toward stable inflation and sustainable growth.
A lingering concern for many economists is the strength of exports since overseas economies, especially those in the Asian region, remain somewhat fragile. But Thursday's data offered a possible bright sign ahead.
Machinery orders from overseas rose 71.3% from a month ago to Yen1.6 trillion ($15.7 billion) in April. The pace of growth was the second-highest on record while the value was the highest since the government began taking comparable data in April 2005. Overseas demand has now posted five straight months of on-month gains.
The outcome is encouraging because the overseas demand for machinery can be viewed as a leading indicator for exports, said Yuki Endo, economist at Hamagin Research Institute.
"Exports aren't that strong right now, but today's outcome suggests we may see demand from overseas pick up in the months ahead," he said.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
June 11, 2014 21:56 ET (01:56 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.DN201406110134882014-06-12 01:56:00.0007M4ON7HTUM0S1I92EE3FRFPSSDDJNF
By Takashi Mochizuki
TOKYO--Japanese machinery orders fell in April from the previous month, but the drop was smaller than expected and economists remain optimistic about the nation's corporate capital investment trend.
Policy makers are hoping that capital expenditure will remain relatively robust to help support the economy amid concern that a drop in consumption in the wake of a sales tax increase might derail the Abe administration's efforts to boost the economy with its pro-growth policies known as Abenomics.
Core machinery orders fell 9.1% in April from a month ago, the Cabinet Office said Thursday. The outcome was better than an 11.0% drop expected by economists polled by The Wall Street Journal and the Nikkei.
Machinery orders, though often volatile, are widely regarded as a leading indicator of corporate capital investment. The core figure excludes orders from electric power companies and those for ships because of their large size and volatility.
The drop in orders from the previous month was nothing worrisome, economists say, because the data surged in March due to many one-time orders.
"This month's outcome is nothing negative when judging the economy's midterm trend," said Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting.
Mr. Miyagawa said the Thursday outcome confirmed Japan's capital expenditure trend "is strong."
Many analysts say that Japan's economy is holding up well after the sales tax increase in April, despite widespread fears earlier this year that the higher rate might dent consumer spending and disturb the economy's path toward stable inflation and sustainable growth.
A lingering concern for many economists is the strength of exports since overseas economies, especially those in the Asian region, remain somewhat fragile. But Thursday's data offered a possible bright sign ahead.
Machinery orders from overseas rose 71.3% from a month ago to Yen1.6 trillion ($15.7 billion) in April. The pace of growth was the second-highest on record while the value was the highest since the government began taking comparable data in April 2005. Overseas demand has now posted five straight months of on-month gains.
The outcome is encouraging because the overseas demand for machinery can be viewed as a leading indicator for exports, said Yuki Endo, economist at Hamagin Research Institute.
"Exports aren't that strong right now, but today's outcome suggests we may see demand from overseas pick up in the months ahead," he said.
Write to Takashi Mochizuki at takashi.mochizuki@wsj.com
(END) Dow Jones Newswires
June 11, 2014 21:56 ET (01:56 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc.DN201406110134882014-06-12 01:56:00.0007M4ON7HTUM0S1I92EE3FRFPSSDDJNF
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