Japan's machinery orders fall

Japan's core machinery orders unexpectedly fell in April, suggesting a bumpy recovery from a devastating earthquake and tsunami as some companies delay capital spending until reconstruction-driven demand materialises. The economy is still expected to pick up steam in the second half of the year, allowing the Bank of Japan to refrain from further policy easing when it meets this week.
However, a government official told reporters a double digit rise in orders firms had forecast for this quarter back in March, looked hard to achieve after Monday's data. "A loss of business confidence outweighed expectations for reconstruction demand. April was still too early," said Takuji Okubo, chief economist at Societe Generale Securities.
"But we can be still positive about the capital expenditure outlook. We expect machinery orders to grow from May to June as demand eventually will come. The figures were disappointing but not alarming, so the BoJ can afford to be on hold." Machinery orders data, albeit volatile, are seen as a key measure of corporate activity that can translate into jobs and private consumption. Core machinery orders fell 3.3 percent in April from the previous month, Cabinet Office data showed on Monday, weighed by orders from machine manufacturers and transportation service firms. The Cabinet Office decided to exclude orders for mobile phones from April data, saying they no longer reflected capital expenditure trends.
The fall in core orders, compared with the median market forecast for a 2.2 percent increase and follows a 1.0 percent rise in March. The surprise fall contributed to a drop in the Nikkei benchmark stock index, dragged down by further signs of a global economic slowdown and losses for Toyota Motor after a weaker-than-expected earnings forecast.
The government adjusted the orders forecast for the current quarter to account for the exclusion of cellular phones to a 10.4 percent rise from 10.0 percent, but a Cabinet Office official said the forecast made in March looked problematic after a drop in April.