Core private-sector machinery orders fell a seasonally adjusted 0.025 percent in July from the previous month, signalling that some companies are still reluctant to increase investment.
The orders, which exclude those for ships and from utilities due to their volatility, fell to ¥777.2 billion from ¥777.4 billion, marking the second consecutive month of decline, the Cabinet Office said Thursday.
Private-sector machinery orders are widely viewed as an indicator of future capital spending, and economists had forecasted an upturn this month.
Nevertheless, the government left its basic assessment — that orders are “picking up moderately” — unchanged.
A Cabinet Office official said the slight fall in July doesn’t suggest business investment will languish, because other data show that firms are eager to beef up spending with the economy “bouncing back.”
The effects of Prime Minister Shinzo Abe’s “Abenomics” program of drastic monetary easing, massive public spending and promises of serious structural reforms to promote growth, are rippling through the real economy, the official claimed.
Some analysts, however, are skeptical about whether companies will actively try to expand production capacity by building new factories or buying new equipment amid lingering uncertainty over the debt- and deflation-ridden economy, stagnant wages and the scheduled doubling of the consumption tax.
“The growth strategy has yet to be implemented in a full-fledged manner . . . and there is a risk that the planned sales tax hike next April will hurt the economy,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.
“Capital spending is expected to gradually pick up, but it is unlikely to increase at an accelerated rate,” he said.
Orders from the manufacturing sector rose a seasonally adjusted 4.8 percent in July to ¥318.7 billion, up for the third consecutive month, while non-manufacturers’ orders were almost flat, up 0.019 percent to ¥462.4 billion after gyrating by two digits in the previous two months.
By industry, the pulp and paper sector contributed much of the growth.
The non-ferrous metal and steel sectors also boosted orders, but the transport equipment sector slid, the office said.
Overseas demand for Japanese machinery, an indicator of future exports, climbed 1.4 percent to ¥766.0 billion after a 16.7 percent plunge in June, it said.
But fears are growing that the April tax hike, along with stagnant wage growth, will make households and firms reluctant to spend, preventing the economy from halting nearly two decades of deflation.
Under legislation enacted last year, the first stage of the consumption tax hike is set to lift the rate to 8 percent from 5 percent next April in a bid to improve the country’s dire fiscal health, which is the worst among the industrialized economies. Abe is expected to go ahead with the hike next month.
Recent data have signaled business investment is on a recovery track, with the revised gross domestic product data released Monday by the Cabinet Office showing it rose 1.3 percent on quarter in the April-June period, marking the first growth in six quarters.
Large and smaller companies in all industries plan to augment capital spending by 9.1 percent in fiscal 2013 through next March over the previous year, a survey by the Finance Ministry said Wednesday.