- Junichi Makino, chief economist at SMBC Nikko Securities
Japan's core machinery orders plunged the most in 18 months in November following strong increases in previous months, adding to uncertainty over the outlook as domestic demand remains sluggish, while China's downturn dims global growth prospects. Core orders, a leading indicator of business investment, dropped 14.4% on month, compared with economists expectations for a 7.9% decline. In annual terms, orders increased 1.2%. China's slowdown and plunging oil prices rattled global markets at the beginning of the year, fuelling concerns of deepening slowdown in the world economy and potentially dimming confidence at Japanese companies. Uncertainty over the outlook could lead Japanese firm to further postpone implementing their spending plans. Companies surveyed by the Cabinet Office have predicted core orders would rebound to a 2.9% increase in the final three months of 2015, after a 10% decline in the prior quarter. The BoJ has predicted capital investment will surge 8% in the fiscal year ending March, but recent data show it grew only at a pace of 1-2% in April-September.
The world's third biggest economy narrowly escaped a recession in July-September. It is expected to continue moderate growth in the last quarter, but some economists highlighted the risk of a contraction due to weak consumption and slack capital spending.
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