October 8, 2015 / 12:51 AM / 4 years ago

UPDATE 3-Japan machinery orders fall in August, undermine BOJ optimism

(Adds services sentiment survey)
    * Aug core machinery orders -5.7 pct m/m vs f'cast +3.2 pct
    * Manufacturers' orders -3.2 pct; service sector -6.1 pct
    * Machinery orders undermines BOJ's optimism on corp sector
    * Speculation lingers that BOJ will ease policy soon

    By Stanley White
    TOKYO, Oct 8 (Reuters) - Japan's machinery orders
unexpectedly fell in August in a worrying indication that
capital expenditure is weaker than many policymakers expected,
which could increase the chances of new fiscal and monetary
    Core machinery orders, a leading indicator of capital
expenditure, fell 5.7 percent in August versus the median
estimate for a 3.2 percent increase, and followed a 3.6 percent
decline in the previous month.
    The decline in machinery orders suggests capital expenditure
is not as strong as indicated in last week's Bank of Japan
tankan survey and could undermine Governor Haruhiko Kuroda's
    The September tankan survey found that big firms plan to
raise capital expenditure by 10.9 percent in the fiscal year
that started April 1, compared with their previous plan to boost
capital spending by 9.3 percent. 
    Kuroda citied these figures as one reason inflation will
pick up after the central bank left policy on hold on Wednesday,
but the slide in machinery orders undermines this argument.
    The Cabinet Office lowered its assessment of machinery
orders to say they are stalling.
    Machinery orders fell 3.2 percent in August from July led by
down by electronics, steel and car manufacturers, Cabinet Office
data showed. 
    Orders from non-manufacturers' fell 6.1 percent, due to
declines in orders from financial services and shipping.
    An unexpected decline in August industrial production led
some economists to say the economy may have contracted in
July-September, which would put it in a technical recession
after a contraction in April-June.
    Machinery orders are very volatile, so it is premature to
say whether or not the chance of a recession has increased, but
the outlook is still weak due to worries about overseas demand,
economists say.
    Reflecting other domestic demand concerns, sentiment in the
services sector worsened for the second straight month in
September as retailers and restaurants turned more pessimistic,
a separate Cabinet Office survey showed.
    The survey's index, which measures responses from service
employees such as taxi drivers, hotel workers and retail staff,
fell to 47.5 in September from 49.3 in the previous month. A
reading below 50 means pessimists outnumber optimists.
    Some economists expect the BOJ to ease policy on Oct. 30,
when it is expected to cut its long-term economic and price
growth forecasts.
   "Our house view is the BOJ will ease policy in January, but
the chances have risen that the BOJ will move later this month.
There will also be talk about a new fiscal stimulus package,"
said Mizuho Research Institute senior economist Hidenobu Tokuda.

 (Reporting by Stanley White; Editing by Eric Meijer)
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