— Japan Nov Machiner Orders Weaker Than MNI Consensus +1.9%
— Japan Nov Machinery Orders Post 3rd M/M Drop In Row
— Japan Govt: Machine Orders Picking Up But Non-Mfg Weak
— Japan Govt View Downgraded From Machine Orders Picking Up
— Japan Nov Core Machine Orders Ex-Handsets +0.8% M/M Oct +0.6%
— Japan Nov Core Machinery Orders +11.6% Y/Y Vs Oct +7.0%
— Japan Nov Core Machinery Orders Post 5th Y/Y Rise In Row

TOKYO (MNI) – Japan’s core private-sector machinery orders
unexpectedly slumped by a seasonally adjusted 3.0% in November, marking
the third consecutive m/m drop, hit mainly by a slump in orders from
mobile carriers and financial firms, the Cabinet Office said Thursday.

The November m/m decline was followed the 1.4% drop in October and
10.3% in September, which was in payback for the 10.1% surge in August.

The November core figure came in much weaker than the 1.9% m/m rise
expected in the median forecast in a MNI survey of economists (forecast
range: -4.5% to +4.3%).

Compared to a year earlier, core private machinery orders rose
11.6% in November, posting the fifth straight y/y gain and accelerating
from +7.0% in October but decelerating from 24.1% in August.

The Cabinet Office downgraded its longer-term assessment, saying:
“Machinery orders are picking up but there are weak spots in the
non-manufacturing sector.”

It was the first downgrade in a year. Last month the government
simply said, “Machinery orders are picking up.”

But Cabinet Office official Shigeru Sugihara told reporters core
machinery orders are “basically on a picking up trend and not
faltering.”

He noted that weaker orders for mobile handsets and rail cars
contributed to the drop in orders from non-manufacturers in November.

Core private-sector machinery orders, which exclude volatile demand
from electric utilities and for ships, are viewed as a leading indicator
of corporate capital investment.

Core private orders minus mobile handsets, a fairly new reading
used as a guide to the underlying orders trend, rose 0.8% m/m in
November, posting the second straight gain after +0.6% in October and
-14.2% in September.

The weaker-than-expected core machinery orders in November (-3.0%)
were caused by a slump in orders from telecoms and financials, the two
major industries in the non-manufacturing sector, which sets the overall
tone.

“The manufacturing sector is picking up while there are soft spots
in the non-manufacturing sector,” another official at the Cabinet Office
said.

“Foreign orders are still improving on the whole. The latest drop
followed the sharp rise in the previous month that was pushed up by
temporary large orders for power-generating machines.”

The 20.0% m/m drop in orders for telecoms in November (-11.8% in
October, +28.1% in September) came after those for winter models of
mobile handsets had already been placed, the official said.

If core orders in December were unchanged from November, fourth
quarter orders would post a 7.4% drop on quarter, better than the -9.8%
forecast by the government for Q4 but still much weaker than +9.6% in
July-September, according to the Cabinet Office.

Core orders in the private manufacturing sector totaled Y310.1
billion in November, up 10.6% m/m after +1.4 in October and -20.7% in
September.

Both orders for general machinery and automobiles are on an uptrend
while those for electrical machinery have been fluctuating with some
weakness.

Orders from the non-manufacturing sector excluding demand for ships
and from power firms totaled Y413.2 billion, down 10.5% m/m, after -8.7%
in October and +3.0% in September.

In February 2010, core orders for the non-manufacturing sector fell
to a recent low of Y393.5 billion, close to the lowest level of orders
from non-manufacturers at Y369.0 billion recorded in May 1987.

The key to a rise in total core domestic private-sector orders is a
recovery of demand from non-manufacturers, including telecom carriers
and transportation firms, because the total demand from
non-manufacturers is much larger than that from manufacturers.

The telecommunications industry has been hit by stiff price
competition among mobile carriers, with demand fluctuating sharply in
recent months. Orders from the sector plunged 20.0% m/m in November and
11.8% in October after surging 28.1% in September, the highest gain
since +30.2 in September 2009.

Meanwhile, orders from finance and insurance firms slipped 10.6%
m/m in November after -13.6% in October after +18.0% in September.
Orders from the sector have also been fluctuating widely.

Outside the core domestic private sector, machinery orders from
overseas totaled Y784.7 billion in November, down 17.8% m/m after +16.0%
in October and +6.9% in September, keeping a gradual increasing trend.
The November drop was the largest fall since -22.6% in April 2009.

Foreign orders rose 24.4% y/y in November on an unadjusted basis,
resulting in gains for 13 consecutive months.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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