Japan's Machinery Orders Up 1.6% in June

The small rise in June indicates there will be no sharp recovery in corporate capital spending in the near term.

Japan's core machinery orders, a key indicator of future corporate capital spending, rose by a smaller-than-expected 1.6% in June from the previous month, official data showed on August 11.

The rise came after a 9.1% drop in May but was much smaller than the 5.5% rise expected by economists, according to a survey carried out by Dow Jones Newswires and the Nikkei economic daily.

Core orders are private-sector orders excluding particularly volatile demand from power companies and for ships.

The small rise in June indicates there will be no sharp recovery in corporate capital spending in the near term and suggests companies may be deferring spending as Japan's export-driven recovery loses steam.

The market was surprised by a fall of 1.5% in industrial output in June from the previous month, missing expectations of a 0.1% rise, data showed last month.

The government expects machinery orders to grow by just 0.8% in the July-September quarter.

"Orders that had grown at a rapid pace in the January-March period are likely to slow down in the summer. Due to an uncertain outlook, companies are becoming prudent over increasing capital spending," said Naoki Murakami, an analyst at Monex Securities.

Japan will withdraw incentives for purchases of environmentally-friendly cars next month, which were launched last year to kick-start a recovery after a bruising recession.

Japanese firms face a litany of woes -- overseas demand moderating amid an increasingly uncertain global economic outlook, the strong yen and domestic demand threatened by the waning effects of government stimulus.

Copyright Agence France-Presse, 2010

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