Business / Economy

Japan's machinery orders up 2.1% in February to highest level in over 2 years

Kyodo

Core private-sector machinery orders rose nationally by 2.1 percent in February from the previous month, boosted by robust demand from manufacturers in an encouraging sign of a strengthening economy, government data showed Wednesday.

The orders, which exclude those for ships and from utilities because of their volatility, stood at ¥891 billion ($8.3 billion), the largest figure since January 2016, according to the Cabinet Office.

The result was much stronger than market forecasts, which had predicted a slide of around 2.5 percent. The increase in machinery orders, seen as an indicator of future capital spending by companies, followed an 8.2 percent rise in January.

The Cabinet Office said machinery orders show signs of “picking up,” maintaining its assessment.

Helped by strong demand from the iron and steel sector, orders from manufacturers rose 8 percent to ¥442.3 billion, the highest level since July 2008. February’s figure was also lifted by large orders from the chemical industry.

Orders from the nonmanufacturing sector, meanwhile, eked out a gain of 0.04 percent to ¥465.7 billion.

Overseas demand for Japanese machinery, an indicator of future exports, slipped 7.8 percent to ¥1.01 trillion after a sharp gain in January.

Total orders, including those from the domestic public sector and abroad, fell 2.3 percent to ¥2.42 trillion.

On a quarterly basis, machinery orders are expected to have fallen 1.5 percent in the three months through March after two straight quarters of growth, according to the Cabinet Office.

Japan’s economy has benefited from robust overseas demand for domestic products, with capital spending, a key component of its gross domestic product, picking up.

Economists expect capital spending will grow moderately thanks to strengthening overseas demand and as automation and other labor-saving technologies become more appealing to companies facing severe labor shortages.

Still, a further rise in the yen could reduce appetite for increased investment even as the Bank of Japan’s aggressive monetary easing has facilitated fundraising by companies.

Coronavirus banner