— See Separate Table For Details Of Individual Forecasts
TOKYO (MNI) – Japan’s core private-sector machinery orders are
likely to show a seasonally adjusted 0.2% fall on month in October,
improving from the 10.3% drop in September, according to the median
forecast of economists surveyed by Market News International.
Despite the expected fall for the second straight month, economists
say core machinery orders, seen as a leading indicator for capital
investment, remains on a gradual recovery trend.
The Cabinet Office will release October machinery orders data at
0850 JST on Wednesday, Dec.8 (2350 GMT Tuesday).
“(Core machinery orders) remain on a gradual increasing trend,”
said Yoshiki Shinke, senior Economist at Dai-Ichi Life Research
Some data released recently suggest that orders in October will
show a better performance than the sharp drop in September. In
particular, domestic machine tool orders rose 61.1 on year in October,
accelerating from +38.7% in September, the Japan Machine Tool Builders’
Association reported Nov. 24.
According to the Cabinet Office’s outlook, October-December core
machinery orders will fall 9.8% on quarter, reversing the solid
9.6% gain in Q3, and ending the streak of four consecutive q/q
But if October orders show only a slight m/m drop, as forecast in
the MNI survey, core orders are expected to post a smaller fall in Q4.
The Cabinet Office has said even if core orders showed -3.0% m/m
every month in Q4, the decline would be -9.8% q/q in October-December.
If core orders were flat in each of the three months, they would only
show a decline of -4.1% q/q.
Last month, the Cabinet Office repeated its longer-term assessment,
saying, “Machinery orders are picking up,” despite the 10.3% drop in
Some economists are concerned that capital investment planned in
this fiscal year might be pushed back until fiscal 2011 in light of the
strong yen, slowing export growth and sluggish domestic consumption.
However, Takumi Tsunoda, senior economist at Shinkin Central Bank,
said corporate demand to upgrade production capacity is likely to
support capital investment, especially as firms held back on capital
investment in 2009.
The recent recovery in corporate profits are seen as a key factor
supporting both machinery orders and capital investment.
The quarterly survey by the Ministry of Finance showed that the
combined current profits before extraordinary items of non-financial
firms at the parent level rose 54.1% from a year earlier in Q3, posting
the fourth straight y/y rise, but slowing from the 83.4% gain in Q2.
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