Japan Core Machinery Orders Up for First Time in Four Months

Feb. 10, 2011
Up 1.7% in December compared to 3% drop in November and 1.4% drop in October

Japan's core private-sector machinery orders, a leading indicator of corporate capital spending, edged up 1.7% in December from the previous month, official data showed on Feb. 10.

The data marked the first increase in four months, reflecting the nation's economic recovery, but fell far short of the 5.3% rise expected by the market.

The positive core data, which exclude particularly volatile demand from power companies and for ships, rebounded from a 3% fall in November and a 1.4% drop in October, the Cabinet Office said.

"Machinery orders are on the recovery trend, but weakness is seen in the non-manufacturing sector," it said.

For the January-March quarter, the government expected core private-sector orders to rise by 2.7% from the previous quarter.

The data were the latest positive Japanese indicators, following a fall in the unemployment rate, expanding exports and strong corporate earnings.

The Bank of Japan has lifted its growth forecast, and consumer confidence has also brightened.

While below expectations, the rising core machinery orders showed improving business investment, said Takuji Aida, a senior economist at UBS Securities Japan. "Capital expenditure momentum will continue to recover in 2011, because Japanese corporations had cut investment too much compared to depreciation, and need to spend more to maintain facilities and stay internationally competitive," he told Dow Jones Newswires.

"We assume that the recovery in the United States will continue, and that there will be no big fiscal and monetary tightening in developing countries, so the trend of Japanese exports should remain favorable," he said.

It should support more "gradual rises" in spending on indicators of investment like core machinery, Aida added.

Copyright Agence France-Presse, 2011

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