June 10, 2020 / 12:31 AM / 2 months ago

UPDATE 2-Japan's machinery orders, wholesale prices sink as pandemic hits business spending

* April core machinery orders fall 12% vs f’cast -8.6%

* Pandemic seen hurting business spending in months ahead

* Wholesale prices plunge 2.7% yr/yr vs f’cast -2.4% (Adds wholesale price data in paragraph 2, economist comments in paragraphs 6, 10)

By Daniel Leussink

TOKYO, June 10 (Reuters) - Japan’s machinery orders slumped in April at their quickest pace in nearly two years, as a drop in demand and company profits caused by the coronavirus pandemic paralysed businesses spending.

Separate data showed May wholesale prices fell at the fastest annual pace in nearly four years, keeping alive market fears Japan may slide back into deflation.

The weak readings will pressure policymakers to take bolder action to support an economy already headed for deeper recession caused by the pandemic.

Core machinery orders, often regarded as an indicator of capital spending in the coming six to nine months, tumbled 12.0% in April from the previous month, Cabinet Office data showed on Wednesday.

The drop was larger than an 8.6% decline seen by economists in a Reuters poll and the fastest decline since September 2018.

“It’s hard to expect improvements in overall machinery orders unless overseas economic conditions recover and Japanese exporters boost investment domestically,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

The world’s third-largest economy fell into recession in the last quarter, although firmer capital expenditure remained one of the few bright spots as demand for machinery and big ticket items held up.

The fall in machinery orders in April suggests that resilience in business investment is now also giving way, a sign the recession is likely to deepen in the current quarter.

Overseas orders dropped 21.6% from the previous month for their biggest tumble since April 2019, highlighting growing concerns about the external environment.

“Moves (by companies) to limit capital investment including on machinery orders continued...due to a deterioration of profits,” said Miyazaki.

The soft machinery orders data came after separate, preliminary data showed on Tuesday Japan’s machine tool orders fell 52.8% in May from a year earlier.

The government and central bank have both taken steps to cushion the blow from the pandemic, with the Bank of Japan easing monetary policy for two straight months in April.

At its June 15-16 policy meeting, the BOJ could maintain its projection that the economy will gradually recover from the damage caused by the virus outbreak in the latter half of the year.

That would reduce the need to cut interest rates or increase asset purchases.

By sector, manufacturers’ orders dropped 2.6%, weighed by general purpose and production machinery, while core orders from the service-sector lost 20.2%, the sharpest month-on-month drop since comparable data became available in April 2005.

From a year earlier, core machinery orders fell 17.7% in April, coming in worse than an expected 14.0% decline and following a 0.7% drop in March. (Reporting by Daniel Leussink; additional reporting by Leika Kihara; Editing by Sam Holmes)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below