Japan machinery orders rise, COVID emergency outlook clouded by Reuters

© Reuters. FILE PHOTO: Fanuc Corp machinery models are seen in Terminal 1 of Narita International Airport

By Tetsushi Kajimoto TOKYO (Reuters) – Japan’s basic machinery orders rose unexpectedly for the second month in a row in November, data showed Thursday, although a new coronavirus emergency in Tokyo and 10 other areas could dampen business appetite for the capital expenditure. The surprise gain in core orders, a key indicator of capex, could be a temporary relief for policy makers who expect corporate investment to spur a recovery driven by private demand in the world’s third-largest economy. Data from the Cabinet Office showed that core orders, a highly volatile data set seen as an indicator of capital spending in the next six to nine months, grew 1.5% in November from October, led by increased demand for chip-making equipment and computers, possibly supported by people working from home. It was a second consecutive month of gains and compared to economists’ median estimate of a 6.2% drop, following a 17.1% jump in the previous month. However, Japanese companies could be cautious about boosting capex due to declining corporate profits, while a state of emergency implemented in Tokyo and 10 other prefectures through February 7 could exacerbate concerns. “Core orders probably recovered in the fourth quarter due to stifled demand for capital expenditures thanks to government stimulus and economic recovery abroad,” said Takeshi Minami, chief economist at the Norinchukin Research Institute. “That will be temporary. The coronavirus has been spreading in Japan and elsewhere, forcing lockdowns on major economies, which will affect Japanese exports and service sector activity.” By sectors, orders from manufacturers fell 2.4% month-on-month, while those from non-manufacturers grew 5.6% from the previous month, data from the Cabinet Office showed. The government raised its assessment on machinery orders, saying they showed a recovery movement. It previously said that orders had stopped falling. Japan’s economy recovered strongly in the third quarter from its deepest postwar depression, thanks to the recovery of exports and private consumption, which account for more than half of the economy. But some analysts pointed to the risk of a double dip recession in the future given the current third wave of coronavirus infections.

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