Japan’s Machinery Orders Drop Close to 20% in May Tax Hike Blamed

Japan’s core private-sector machinery orders plunged by a record 19.5 percent in May, the government said Thursday, signaling the first consumption tax hike in 17 years on April 1 has blurred the economic outlook, discouraging companies from beefing up investment.

The orders, excluding those for ships as well as from utilities because of their volatility, fell following a seasonally adjusted 9.1 percent drop in April, after soaring 19.1 percent in March, the fastest growth since comparable data became available in April 2005, the Cabinet Office said.

The value of the orders, widely regarded as a leading indicator of capital spending, slid to 685.3 billion yen, the smallest since January 2013, prompting the government to downgrade its basic assessment of the orders.

The office said the orders are at a “standstill in their growth trend,” after saying last month they are “on a growth trend.”

Prime Minister Shinzo Abe’s government sees business investment as a pillar of economic growth. The plummet in machinery orders is likely to put a damper on optimism that a robust corporate sector can help ease the negative impact on the economy of the 3-percentage-point tax hike to 8 percent, analysts said.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza