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Japan August machinery orders fall, miss expectations By Reuters

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© Reuters. FILE PHOTO – A factory is visible in front Mount Fuji, Yokohama (Japan), January 16, 2017. Photo taken January 16, 2017 REUTERS/Kim Kyung-Hoon/File Photo

By Kantaro Komiya

TOKYO, Reuters – Japan’s core machine orders fell unexpectedly in August. This highlights the persistent pressures on the economy and businesses as they struggle to overcome the effects of the coronavirus pandemic.

Core orders showed a 2.4% decrease in core orders as compared to August. The decline was due to the greatest drop in orders from manufacturing in five years.

The July contraction was compared with the 0.9% gain in July, but a Reuters poll showed 1.7% growth.

The government commented on the data by lowering its estimate of machinery orders for first time in six month. It stated that a recovery appeared to have stalled.

Masato Koike from Dai-ichi Life Research Institute stated that the picture was “solid manufacturers and weaker non-manufacturers” so far. However, this gap is closing.

Export-oriented manufacturers face headwinds that range from supply chain bottlenecks and a slowdown in global economic growth to a slower pace of recovery. However, service-oriented nonmanufacturers are more likely to recover as COVID-19 improves.

After Yoshihide Sug saw his support eroded by the rising coronavirus infections, protracted restrictions and a weakened government, Fumio Kishida became Prime Minister.

Although Japanese companies have provided some momentum for the recovery of the economy through exports, solid output and capital spending, it is likely that the future will be bumpy.

The Reuters Tankan reported Wednesday that manufacturers’ sentiment fell to a six month low in October because of a persistent supply shortage and soaring materials costs.

Analysts forecast that Japan’s GDP will grow by 1.9% annually in July and September, following a 2.9% annualized gross domestic product (GDP). This indicates that private consumption is slowing, if not declining.

According to sector, the August decrease in orders by manufacturers was 13.4%. It is the first drop in five consecutive months. The reason for this decline can be attributed to weaker demand from shipmakers and electronic machine production machines. This was the largest fall in orders since February 2016.

After a dip of 9.5% in July, orders from non-manufacturers rose 7.1%. This was largely due to increased demand from wholesale and retail suppliers and logistic companies.

The decline in external orders after the 24.1% increase over the prior month was 14.7%.

Shintaro Inagaki (senior market economist, Mizuho Securities) stated that although the results were less than expected, it did not indicate that machinery orders would continue to decline.

“Concerns about the commodity price inflation, chip shortage and other concerns are not likely to continue for long. But they’re unlikely to last beyond next spring.”

The core orders, which do not include those for ships, increased 17.0% in august compared with the previous year. It also showed a double-digit decrease in the same month of 2020. Reuters polled economists and predicted a jump of 14.7%.



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