Japan Machinery Orders at Seven Year High

The value of Japan’s core machinery orders rose to a 7-year high in May and were up for the third-straight month, adding to recent evidence of a steady pick-up in spending by firms and raising hopes of a more durable economic recovery.  Thursday’s data and a key central bank survey last week suggest Corporate Japan is finally starting to buy into Prime Minister Shinzo Abe’s radical ‘Abenomics’ stimulus policies aimed at sparking sustainable growth in the world’s third-largest economy.

The 0.6 percent rise in core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, beat economists’ median estimate of a 5.0 percent drop, Cabinet Office data showed.  The Cabinet office said the value of core orders, which exclude those of ships and electric power utilities, reached its highest levels since June 2008.

“Machinery orders turned out pretty strong. That indicates a positive trend for capital spending for the time being,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.  Japanese firms had long been hesitant to boost capital spending despite ultra-low borrowing costs made possible by years of loose money policies from the Bank of Japan.


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