Japan's machinery orders dip in March amid coronavirus outbreak

Core private-sector machinery orders fell 0.4 percent in March from the previous month recording the first decline in three months, government data showed Wednesday, in a sign the coronavirus outbreak has been sapping demand for capital expenditure.

The orders, which exclude those for ships and from electricity utilities due to their volatility, totaled ¥854.7 billion ($7.9 billion), according to the Cabinet Office.

Demand from automakers and manufacturers of electric machinery fell dramatically, logging declines of 28.4 percent and 24.4 percent, respectively.

But those declines were somewhat offset by large orders at the end of the fiscal year, including for train carriages and telecommunications equipment, a Cabinet Office official said.

The fall in machinery orders in March followed a 2.3 percent rise in February and 2.9 percent increase in January.

With not enough clear evidence of a virus-triggered downturn, the Cabinet Office maintained its assessment that the machinery orders were “stalling.”

“The data is rather volatile to begin with, so we have to keep watch for several months” to determine a trend, the official told a press briefing. “That said, we are seeing declining demand from some industries, so we can’t be too optimistic about the outlook.”

Looking ahead, the Cabinet Office projected a 0.9 percent decrease in machinery orders in the April to June quarter from the previous three months.

The world’s third-largest economy is being pummeled by the virus as consumers are encouraged to stay home and factories have been temporarily closed to slow the spread of COVID-19, the disease caused by the new coronavirus.

The nation’s gross domestic product shrank for a second consecutive quarter in January to March, fulfillling the technical definition of a recession.

In the reporting month, orders from manufacturers plunged 8.2 percent to ¥343.0 billion while those from nonmanufacturers, excluding those for ships and from electricity utilities, rose 5.3 percent to ¥509.2 billion.

Orders from overseas, seen as an indicator of future exports, dropped 1.3 percent to ¥879.3 billion.

Total orders rose 3.0 percent to ¥2.29 trillion, pushed up by a 17.1 percent climb in demand from the domestic public sector to ¥279.8 billion.

In the fiscal year through March, core private-sector orders fell 0.3 percent from a year earlier to ¥10.40 trillion.

Machinery orders data largely depends on large manufacturers and doesn’t necessarily reflect the business situation for smaller firms struggling under the pandemic. The Bank of Japan will hold an unscheduled monetary policy meeting Friday to discuss steps to facilitate financing for such companies.