Japan's machinery orders fall at fastest in three years

Japan's core machinery orders tumbled in December at the fastest pace in more than three years and companies expect orders to rise only marginally in January-March, raising concerns that recent gains in capital expenditure will taper off. The 11.9 percent decline in December core orders, the largest fall since May 2014, was more than the median estimate of a 2.3 percent fall and followed a 5.7 percent increase in November.
The machinery orders come a day after gross domestic product data for October-December showed capital expenditure had risen for five consecutive quarters, and now suggest this run of gains may not continue at the same pace.
Core machinery orders are regarded as an indicator of capital investment six to nine months ahead. Economists say Japan's economy can continue to grow thanks to the strength in consumer spending and exports, but they also note that consumer prices, not business investment, will ultimately determine whether the Bank of Japan's bold experiment to generate inflation succeeds.
Companies surveyed by the Cabinet Office forecast that core orders, which exclude those for ships and from electric power utilities, will rise only 0.6 percent in January-March after a 0.1 percent decrease in October-December. Orders from manufacturers tumbled 13.3 percent month-on-month in December, the largest decline since February 2016. That followed a 0.2 percent decline in the previous month because of reduced orders from makers of metals and manufacturing equipment as well as makers of nuclear fuel. Non-manufacturers' orders fell 7.3 percent, following a 9.8 percent gain in November due to declines in orders from retailers and wholesalers. For January-March, manufacturers expect their orders to fall 5.7 percent, while non-manufacturers expect their orders to rise 7.4 percent.