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Japan's Machinery Orders Plunge In June

Electric machinery and semiconductor chip processing equipment orders dropped.

Japan said Aug. 8 domestic machinery orders plunged in June after two months of solid gains but analysts were optimistic that buoyant corporate investment will continue to drive economic growth. Core private-sector orders slumped 10.4% in June, the government said, much worse than the 1.8% drop expected by financial markets after a 5.9% gain in May.

Machinery orders placed by the manufacturing sector were 11.4% lower in June than in May, with orders by non-manufacturers down 6.5%.

Machinery orders from overseas held up better than domestic orders, falling 5.9% in June for a rise of 5.7% in the second quarter as a whole.

Year-on-year, core orders were down 17.9% in June, reflecting a tough comparison with record high levels seen a year earlier. "The biggest contributor to the decline in the manufacturing sector was electric machinery, in particular semiconductor chip processing equipment," a Cabinet Office official said.

But machinery manufacturers expect orders to rise 3.7% in the three months to September compared with the previous quarter, the Cabinet Office said. "Given an expected rebound in machinery orders in the next quarter and reassuring industrial production data of late, the unexpectedly large drop will not stand in the way of a widely expected rate increase this month," Mitsubishi UFJ Securities senior economist Tatsushi Shikano said.

Japanese firms continue to set aside more cash to invest in new plant and equipment, surveys have shown.

Copyright Agence France-Presse, 2007

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