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Machinery orders in Japan slipped 1.9% in June

Kyodo

Core private-sector machinery orders fell for a third consecutive month in June as a downturn in manufacturing overshadowed a recovery in nonmanufacturing, the government said Thursday.

The orders, which exclude those for ships and from utilities because of their volatility, slipped a seasonally adjusted 1.9 percent in June to ¥790.0 billion ($7.19 billion), according to the Cabinet Office.

In its June report, the Cabinet Office maintained its assessment that the recovery in machinery orders had “came to a standstill,” a month after downgrading its evaluation for the first time in eight months.

In the April-June quarter, machinery orders slumped 4.7 percent, hurt by weak demand in the nonmanufacturing sector. But orders are expected to rise 7.0 percent in the July-September quarter on robust demand for industrial machinery and rail cars. Orders fell in the previous quarter as well.

Strength in capital spending is seen as critical to the economy to ensure growth led by domestic demand. Japan has benefited from strong exports in recent quarters.

Marking the first fall in five months, orders from the manufacturing sector fell 5.4 percent to ¥345.8 billion. The previous month had seen solid orders placed for thermal and hydraulic power generators and ship engines.

Orders from the nonmanufacturing sector edged up 0.8 percent to ¥450.8 billion as demand rose for calculators, snapping a three-month losing streak.

“We’ve seen solid growth (in machinery orders) in the manufacturing sector … but the weakness in the nonmanufacturing sector was striking,” an official at the Cabinet Office said.

The absence of orders for aircraft and other large items also played a part in the sharp fall from the previous quarter, the official added.

Overseas demand for Japanese machinery, an indicator of future exports, fell 3.1 percent in June to ¥912.4 billion.

Total orders, including those from the public sector and abroad, were up 2.1 percent on the month to ¥2.27 trillion, the Cabinet Office said.