- Tokai Tokyo Research Center
Japan's core machinery orders increased more than expected in March but firms predict orders to drop in the current quarter as companies become increasingly cautious due to a surging Japanese Yen and weakness in overseas economies. Core orders, a leading indicator of business investment, surged 5.5% from the previous month, stronger than a 0.7% increase expected by economists. On a an annual basis, core orders surged 3.2%. For the quarter, core orders gained 6.7% in the three months to March from the previous quarter, but are predicted to decline 3.5% in the April-June period. The projected fall in machinery orders in the second quarter comes amid concerns that the appetite for investment will wane due to the likelihood of slower global growth.
Business investment has been moderately improving in the past few years but is yet to return to levels seen prior to the global financial crisis despite efforts by Prime Minister Shinzo Abe to urge firms to spend more for future growth. Policy makers are relying on an increase in capital expenditure to boost gains in productivity, create new jobs and increase wages. Gross domestic product data for the first quarter showed household spending lacked strength and capital expenditure declined, a worrying sign that domestic demand could falter.
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