Japan’s core machinery orders jumped more than 20 percent in December, but that failed to alleviate concerns about capital spending and the tepid economic recovery as the services sector is still slashing its spending.
The slide in wholesale prices eased as expected, but deflation is still likely to persist for at least a few years as weak domestic consumption pushes companies to cut prices to lure consumers.
“If you look at the quarterly data, non-manufacturers are not doing very well,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute.
“This is a sign that domestic demand isn’t strong and this will weigh on capital expenditure somewhat. We can still expect capital spending to grow this year due to manufacturers’ investment … but without much of a contribution from the services sector, overall spending growth will be gradual.”
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