Japan's core private-sector machinery orders slide in March amid pandemic

Source: Xinhua | 2020-05-21

Japan's core private-sector machinery orders declined in March 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, edged down 0.4 percent in March from the previous month.

The orders totaled 854.7 billion yen (7.94 billion U.S. dollars), in the reporting period, the Cabinet Office said and came on the heels of a 2.3 percent increase in February and 2.9 percent rise in January.

Demand for electrical machinery was particularly weak, dropping 24.4 percent, along with orders for automakers which fell 28.4 percent, in the recording period the office said.

The Cabinet Office maintained its assessment of the orders that they were "stalling," although noted the full impact of the global coronavirus pandemic may yet to be seen, but likely to be reflected in upcoming data.

"The data are rather volatile to begin with, so we have to keep watch for several months to determine a trend. That said, we are seeing declining demand from some industries, so we can't be too optimistic about the outlook," a Cabinet Office official was quoted as telling a press briefing on the matter.

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

They also pointing out that further downside pressure was expected to hit orders as Japan has officially entered a technical recession following gross domestic product shrinking for a second successive quarter in the January-March period.

In the April-June quarter from the previous three months, the Cabinet Office said it expects machinery orders to log a decline of 0.9 percent.

Orders from manufacturers tumbled 8.2 percent in the recording period to to 343.0 billion yen (3.18 billion U.S. dollars), the Cabinet Office's data showed.

Those from non-manufacturers, excluding those for ships and from power companies, climbed 5.3 percent to 509.2 billion yen (4.73 billion U.S. dollars).

Orders from overseas, seen as an indicator of future exports, declined 1.3 percent to 879.3 billion yen (8.17 billion U.S. dollars), the government's data showed.

Total orders rose 3.0 percent to 2.29 trillion yen (21.27 billion U.S. dollars), meanwhile, with the orders comprising 279.8 billion yen (2.59 billion U.S. dollars) from the domestic public sector, which marked a 17.1 percent increase in demand from the previous month, the office also said.

Core private-sector orders edged down 0.3 percent from a year earlier to 10.40 trillion yen (96.63 billion U.S. dollars) in the fiscal year through March, the government's latest data also showed.

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 was the case in the latest period owing to the adverse effects of the coronavirus outbreak, 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.