Japan Machinery Orders Fall, Keeping BOJ on Edge

Japan’s core machinery orders fell for a second straight month in February in a sign that business investment remains soft, and analysts say the smaller-than-expected decline won’t necessarily allow policymakers to relax given an uncertain economic outlook.  The 0.4 percent monthly fall in core machinery orders, a highly volatile data series, came as a recent run of weak indicators raised doubts about a sustainable economic rebound following a recession last year.

However, the figure released by the Cabinet Office on Monday was better than economists’ median estimate of a 2.8 percent decline and followed a 1.7 percent drop in January.  Analysts say the decline in core orders, regarded as an indicator of capital spending in the coming six to nine months, was a reaction to a 8.3 percent gain in December, and expect them to mark a third straight quarterly gain in January-March.

“The figure was not bad at all as it points to growth in core orders in the first quarter,” said Koya Miyamae, senior economist at SMBC Nikko Securities.  “But given weakening exports and private consumption, the pace of pickup will likely slow from April.”


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