Japanese machinery orders fall

Japan's core machinery orders tumbled in the three months to September due to slowing exports, raising concern about capital spending, which has been one of the main drivers of the country's economic recovery. The figures on Thursday, a day before gross domestic product (GDP) data for the quarter, prompted the government to downgrade its view on machinery orders for the first time in three years. It now says the pace of growth in orders is slowing.
"It is a weak report," said Takehiro Sato, an economist at Morgan Stanley in Tokyo. "Capex is seen to have already peaked out in July-September and to be in a mini-correction phase."
Separate Bank of Japan (BoJ) data showed that deflation, while easing, had yet to be conquered, and BoJ Governor Toshihiko Fukui said he was not sure whether the central bank would end its hyper-loose monetary policy next year.
"It is not yet clear whether we will make a change during fiscal 2005/06. When we change the policy framework and adjust short-term rates to match economic conditions depends on developments in prices and the economy," Fukui said at an economic forum in Tokyo.
Data from the Cabinet Office showed core private-sector machinery orders, which exclude those for ships and equipment at electric power firms, dipped 8.4 percent in July-September from the previous quarter.
In September alone, core machinery orders fell 1.9 percent from August, in contrast to a median forecast of a 0.1 percent rise in a Reuters poll.
Compared with the same month last year, core orders rose 5.0 percent in September. The poll forecast a gain of 6.3 percent.
The 8.4 percent drop for July-September contrasted with the initial estimate of an 1.8 percent rise by the government and followed a robust 10.3 percent rise in April-June.
But an official at the Cabinet Office added that the rise in orders was expected to continue, and that capital spending would continue its gradual rise.
The ministry expects core machinery orders in October-December to rise 1.8 percent from the previous quarter.
The softer-than-expected data pushed share prices lower and government bonds higher, but currencies reacted little.
BoJ data on Thursday showed wholesale prices fell slightly in October from the previous month as lower machinery, electricity and agricultural goods prices offset a rise in oil prices.