— See Separate Table For Details Of Individual Forecasts

TOKYO (MNI) – Japan’s core private-sector machinery orders appear
to have posted a second straight month-on-month rise in January, up by a
seasonally adjusted 3.0% following +1.7% in December, according to the
median forecast of economists surveyed by Market News International.

The Cabinet Office will release January machinery orders data at
0850 JST on Wednesday, March 9 (2350 GMT on Tuesday).

“The data will confirm that the gradual uptrend in machinery orders
remains in place,” said Yusuke Ichikawa, economist at Mizuho Research
Institute.

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

Another piece of data released recently supports the assessment.

Orders for Japanese machine tools in the domestic market, which are
seen as a leading indicator for core machinery orders, rose a revised
100.4% on year in January, accelerating from a 78.7% rise in December,
data released by Japan Machine Tool Builders’ Association show.

Core machinery orders, excluding orders for ships and orders from
electric power industry, are widely seen as a leading indicator of
private capital investment.

Kyohei Morita, chief economist at Barclays Capital Japan, said, “We
will maintain our view that capital investment is bottoming out.”

According to the Cabinet Office’s outlook, January-March core
machinery orders will rise 2.7% on quarter, posting the first gain in
two quarters, reversing a 6.9% fall seen in Q4.

In order for machinery orders to rise 2.7% in Q1, they need to gain
1.3% m/m in each of the three months through March. Even if core orders
show no m/m gain every month, Q1 orders will still show a 0.1% increase,
the Cabinet Office estimates.

Looking ahead, Akira Maekawa, economist at Global Futures and Forex
(GFT), said, “It is highly possible that capital investment will stay on
a gradual uptrend, supported by overseas demand.”

Machinery orders from overseas are estimated to show a sharp 27.8%
quarter-on-quarter gain in Q1, which would be the highest rise since
+33.5% in Q3 of 2009 and following +3.0% in Q4 of 2010, according to the
Cabinet Office.

But few economists expect core machinery orders to show a V-shaped
recovery.

The seasonally adjusted index for capacity utilization ratio, which
is correlated with capital investment, remained low at 89.3 in December
(2005 average = 100), according to the Ministry of Economy, Trade and
Industry.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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