Japan's machinery orders drop to 6-year low in April due to virus outbreak

Source: Xinhua | 2020-06-11

Japan's core private-sector machinery orders dropped in April from a month earlier, the government said in a report on Wednesday.

According to the Cabinet Office, the orders, excluding those for ships and utilities because of their volatility, fell 12.0 percent to 752.59 billion yen (7 billion U.S. dollars) in the recording period, marking the lowest level in almost six years.

The Cabinet Office downgraded its assessment for the first time in six months, stating that orders are "worsening" from its previous view that they were "stalling."

The latest decline in core orders marks the second successive month of decrease and comes on the heels of a 0.4 percent retreat logged in March, the Cabinet Office's data showed.

The global coronavirus pandemic has led to factories shuttering operations worldwide on falling demand as supply chains have become increasingly disrupted. Businesses have also rethought their capital investment plans, which has seen investments downwardly revised, analysts here said.

They added that the Japanese government's stay-at-home request and business closures following a state of emergency first being declared in Japan in April, saw domestic demand plummet while factory output came to a halt.

Orders from manufacturers declined 2.6 percent in the recording period to 334.18 billion yen, the Cabinet Office's data showed.

Those from non-manufacturers, excluding those for ships and from power companies, tumbled 20.2 percent to 406.33 billion yen, marking the sharpest drop since record began.

Orders from overseas, seen as an indicator of future exports, dropped 21.6 percent to 689.45 billion yen, the government's data showed.

Total orders, meanwhile, fell 8.3 percent to 2.10 trillion yen, the Cabinet Office said.

Machinery orders are a key advance indicator for corporate capital spending and the government uses this key data to predict the strength of business spending in a six to nine-month period ahead.

A rise in capital expenditure here can boost the economy as Japanese companies are producing more machinery to meet rising demands from overseas markets.

A drop in such expenditure, as has been the case of late, can have the reverse effect.

Such business investment accounts for roughly 15 percent of Japan's gross domestic product.

Types of machinery included in the monthly government survey comprise engines and turbines, heavy electrical machinery, electronic and communication equipment, industrial machinery, machine tools, railway rolling stock, road vehicles, aircraft, ships, water crafts, as well as sub types in those categories. (1 U.S. dollar equals 107.34 Japanese yen)