Japan Machinery Orders Post Fastest Growth in Seven Years

March 10, 2008
Number helps to ease fears of an imminent recession

Japan said March 10 core machinery orders, a closely watched barometer of business investment, surged at the fastest pace in more than seven years, easing fears of an imminent recession. The Cabinet Office said the core private-sector machinery orders soared by 19.6% in January from the previous month, much more than market forecasts for a gain of about 3.1%.

Economists said large one-off orders for items such as transport equipment were largely behind the sharp increase in orders, which rose for the first time in three months and at the fastest pace since August 2000.

The solid number should ensure capital spending keeps growing in the near term, said Tomoko Fujii, head of economics for Japan at Bank of America. But she added: "Japan's economy lacks a domestic driving force. So a U.S. recession-like state is boding ill for Japan's business cycle."

Concern about the health of Asia's largest economy have grown after earlier reports showed falls in industrial output and corporate capital spending, while exports to the U.S. economy are declining.

The Cabinet Office said core private-sector machinery orders are forecast to rise 3.5% in the three months to March from the previous quarter. But it seems unlikely that machinery orders will remain robust even if they show a solid performance in the first quarter of 2008, warned Naoki Murakami, economist at Goldman Sachs. "Corporate earnings have already peaked out from October-December 2007 and companies, mostly manufacturers, are curbing capital spending," he wrote in a note to clients.

Copyright Agence France-Presse, 2008

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