Japan machinery orders fall, clouding outlook for capital spending recovery

 

Japan's core machinery orders fell for the first time in three months in September and at a faster than expected pace.

By Daniel Leussink
TOKYO (Reuters) - Japan's core machinery orders fell for the first time in three months in September and at faster than expected pace, denting hopes that a quick pickup in business spending could help the economy stage a brisk recovery from its COVID-19 crisis.

The decrease in core orders underscored corporate Japan's reluctance to commit to more capital investment as a resurgence in coronavirus infections darkened the outlook for global demand.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, lost 4.4% in September after a 0.2% rise in the previous month.

The drop, which marked the first decline since June, was much larger than a 0.7% contraction seen by economists in a Reuters poll.

"Production and exports are recovering at a fast pace, so corporate earnings are also likely to improve quite quickly," said Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute.

"But with output dropping so much in the second quarter, firms remain cautious about capital spending."

Manufacturers expected core orders to fall 1.9% in October-December, after a 0.1% drop in the previous quarter that marked the fifth straight quarter of declines, the Cabinet Office data showed on Thursday.