- Capital Economics
Japan's economy can gain momentum even after the tax hike in April. The main reason for such a suggestion is stronger-than-excepted domestic demand. The indicator of core machine orders gives a clear insight on what is happening with the economy, as rising purchase orders indicate that companies will increase activity in order to fill the orders. That is why the reaction on the upbeat data from the manufacturing sector was very impressive, with USD/JPY prolonging its movement to the south and hitting 101.24, moving back to back to the 101-mark.
Japan's core private-sector orders for machinery soared a seasonally adjusted 19.1% in March from the previous month hitting 936.7 billion yen, a report from the government showed Monday, suggesting companies brought forward investment before the April's tax increase. Analysts expected only a 6.1% increase. Moreover, these figures echoes with the last week's GDP report that showed the world's third largest economy expanded 1.5% in the first quarter, receiving a surprise boost from the business investment, which leapt 4.9% on a quarterly basis. Despite optimistic figures, experts believe core machinery orders will post only a 0.4% growth over the April-June period, suggesting the recent spike will be short-lived. There are concerns that the economy can stall or even contract in the second quarter.
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