Japan's Machinery Orders Jump 10.4% in May

Figure is twice that of May, but officials are still worried about economy

Japan's core machinery orders were unexpectedly strong in May but experts warned the official figures released had failed to dispel gloom about prospects for Asia's largest economy. The cabinet office said core machinery orders rose 10.4% in May compared with April, when they had jumped 5.5%, but economists remain worried that the Japanese economy is set to slow as world growth cools.

May's manufacturing sector machinery orders jumped 12.2% from April, while orders by non-manufacturers rose 8.8%.

One-off factors largely explained some of May's rise in machinery orders, said Daiwa Institute of Research economist Keiji Kanda, whereas high oil prices and slowing exports were continuing to squeeze the economy. "It would not allow us to say the economy is accelerating," Kanda said. "Exports are slowing, which is likely to lead to lower capital spending and lower machinery orders."

He said there were also lingering fears of a recession in the U.S., the world's biggest economy and a key buyer of Asian goods and services.

But the longer-term trend in machinery orders was less healthy, and the figures should not be viewed as strong data, said Toshio Sumitani, an economist at Tokai Tokyo Research Center. "The broader trend in machinery orders has been sliding since it peaked out in the spring of 2006," he said. "As prices keep rising, consumer sentiment has been worsening. I believe the economy is deteriorating in June-July," he said.

Copyright Agence France-Presse, 2008

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