- Capital Economics
Machinery orders plunged in Japan in February, offsetting most of January's unprecedented gains, in further signs the world's third biggest economy may need more stimulus. Japan's machinery orders excluding ships and utility items, tumbled a seasonally-adjusted 9.2% month-on-month in February, according to the Cabinet Office, after surging 15% in January. Analysts, however, expected a 11.9% decline in machinery orders in February. Compared with a year earlier, core orders dropped 0.7% in February, less than a median estimate for a 2.7% decline.
In the December quarter the economy contracted 0.3%, led by a slump in consumer spending, while growth indicators so far for the March quarter suggest the economy may have slipped back into recession. Moreover, the Japanese Yen has gained more than 10% versus the US Dollar this year, thereby lowering exporters' earnings. Economists expect the Bank of Japan to soon take action against the surging Yen, particularly as inflation is already non-existent, either by expanding the central bank's Qualitative and Quantitative Easing programme or by slashing interest rates again. The BoJ shocked markets in January by deciding to add negative interest rates to its massive asset-buying programme, but the move has failed to underpin stock prices or arrest an unwelcome surge in the currency.
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