Japan Cabinet Office Delivers Gloomy Forecast For Jan.-Mar. Machine Orders

By BridgeNews Japan's growing pace of private capital spending may slow in the first half of 2001, suggested by machinery orders data, says an official at the Economic and Social Research Institute in the Cabinet Office. His comment notes that key machinery orders rose only 2.6% on quarter in October-December, lower than the Institution's projection of 7.6% gain, and are expected to fall 6.4% on quarter in January-March. If the January-March key machinery orders actually fall on quarter, the drop would be the first time in seven quarters, the official notes. Recent falls in stock prices, a slowing U.S. economy, and the worsening of the global semiconductor market likely attributed to weakening of machinery orders, says the Cabinet Office. Faced with weaker-than-expected machinery orders data, private economists turned more cautious about capital spending. Yoshito Sakakibara, senior economist at Merrill Lynch & Co., says, "The outlook for the January-March key machinery orders is weaker than expected. Given the fact that key machinery orders are a leading indicator of private capital investment, capital investment may show slowing by the middle part of this year, and I would like to closely watch whether or not capital investment will turn to show falls in the later half of this year. If personal consumption fails to show improvement from now on, economic setback will be possible during this year. I currently see GDP [growing] 1.3% on year in the fiscal year 2001-2002 (April-March), after showing a possible 1.6% rise in FY2000. But I may have to revise down FY2001 GDP outlook to near 1.0% growth."

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