Core machinery orders in July-September grew for the second straight quarter, with the steady recuperation of the economy prodding many companies to boost investment, the government said Wednesday.
But the private-sector orders, which exclude those for ships as well as those from utilities because of their volatility, fell in September and are expected to drop during the October-December period, the Cabinet Office said, suggesting uncertainty over the future course of capital spending.
The orders, regarded as a leading indicator of business investment, rose 4.3 percent to ¥2.39 trillion in the three months through September. Given the growth, the Cabinet Office kept its basic assessment of the orders intact, saying they are “picking up.”
Core machinery orders may have grown as Prime Minister Shinzo Abe’s “Abenomics” — centering on aggressive monetary easing and large-scale public works projects — has been bolstering the broader economy, a Cabinet Office official said.
In particular, the Bank of Japan’s large-scale government bond purchasing has driven down long-term interest rates, in turn pushing the yen down. A falling yen usually supports exports by making Japanese firms’ products cheaper abroad and increases the value of overseas revenue in yen terms.
The orders, however, fell a seasonally adjusted 2.1 percent on the month to ¥802.1 billion in September alone, the office said.
In addition, it estimated the orders, which the Abe administration is closely watching as it sees capital spending as a pillar of economic growth, will shrink 2.1 percent in the three months through December.
“Many firms appear to want to watch how much the consumption tax hike in April will negatively affect the economy ahead,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“It may take more time before firms become more willing to increase investment, and capital spending returns to a full-fledged growth path at home,” he said.
Abe announced Oct. 1 that his government will raise the sales tax to 8 percent from the current 5 percent in April, aiming to cover swelling social security costs amid the graying population.
Some experts have warned that the tax measure could drag down consumer spending and investment, choking the budding economic recovery.
In September, orders from the manufacturing sector gained 4.1 percent to ¥334.5 billion, up for the fifth straight month. It was the first time they had continued expanding for such a long period since comparable data became available in April 2005.
Orders from nonmanufacturers, meanwhile, slid for the first time in three months, plunging 7.0 percent to ¥456.7 billion.
Overseas demand for Japanese machinery, an indicator of future exports, jumped 12.1 percent to ¥1.05 trillion, following a 22.4 percent surge in August, the Cabinet Office said.
Economists estimate that the economy grew a real annualized 1.4 percent in the July-September quarter, up for the fourth consecutive quarter, following a 3.8 percent expansion in the April-June quarter, a Kyodo News survey showed last week.
Nevertheless, the government-affiliated Japan Center for Economic Research said Tuesday that gross domestic product is expected to plunge 4.8 percent in the April-June period in 2014, hurt by the scheduled sales tax hike, according to the average projection of 40 economists.