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Japan’s machinery orders rise for a second month in November

Japan’s machinery orders

Core orders grew 3.4% in November from October, rising for a second straight month, the Cabinet Office data showed

Japan’s core machinery orders rose for a second month in a row in November, government data showed on Monday, a sign that corporate appetite for capital spending remained resilient despite pressure from soaring raw material prices.

The gain in core orders, a key indicator of capital expenditure, could be a relief to policymakers hoping for corporate investment to trigger a private demand-led recovery in the world’s third-largest economy.

Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, grew 3.4% in November from October, rising for a second straight month, the Cabinet Office data showed.

It beat economists’ median estimate of a 1.4% rise and followed a 3.8% jump in the previous month.

However, Japanese firms could be cautious about boosting spending due to higher raw material, fuel and transportation costs that are sending wholesale inflation soaring and squeezing corporate margins.

Firms may postpone capital spending from this quarter into the next fiscal year from April as uncertainty in the global economy has risen, said Takeshi Minami, chief economist at Norinchukin Research Institute.

Due to a decline in coronavirus cases and an easing of the global chip shortage, orders from manufacturers recovered up to November, but the outlook is unclear, Minami said.

A government official confirmed firms’ appetite for capital spending faced risks from rising raw material prices, though he added companies were still likely to spend on investments to strengthen their businesses for the future.

Compared with a year earlier, core orders, which exclude volatile numbers from shipping and electric power utilities, jumped 11.6% in November, the Cabinet office data found.

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