— Japan Feb Core Machinery Orders -7.1% Y/Y Vs Jan -1.1%
— Japan Feb Core Machinery Orders Post 20th Y/Y Drop In Row
— Japan Govt Repeats: Machine Orders Downtrend Nearing End

TOKYO (MNI) – Japan’s core private-sector machinery orders
unexpectedly fell a seasonally adjusted 5.4% in February from the
previous month, posting the second straight m/m drop after -3.7% in
January, the Cabinet Office said on Thursday.

The February core figure came in much weaker than the consensus
call of +3.7% m/m.

From a year earlier, core private machinery orders fell 7.1% in
February after -1.1% in January, posting the 20th consecutive drop. The
rate of decline accelerated but is still slower than the record 39.5%
plunge in January 2009.

The Cabinet Office today repeated its assessment of machinery
orders from last month, saying, “the downtrend is coming to an end.”

“While the non-manufacturing sector remains weak, with
telecommunications on a downtrend, the manufacturing sector is still on
a recovery track, although it showed a slight drop in the latest month,”
said a Cabinet Office official.

“Exports are solid but private-sector domestic demand is sluggish,
which is reflected in the weakness in the category of ‘other
non-manufacturing’ (including wholesalers and retailers).”

In March, when January data were reported, the office upgraded its
view for the first time in four months as the decline in January was
limited after a sharp 20.1% gain in December, which was led by the
manufacturing sector.

Only in January this year when reporting November figures (-11.3%
m/m and -20.5% y/y in core readings), did the government downgrade its
view, saying, “the downtrend is coming to an end but there are some weak
moves.”

Despite the second straight monthly drop, core private orders are
likely to show a small second straight quarterly rise.

Assuming core orders will be unchanged in March, orders for
January-March are estimated to rise 0.6% from the previous quarter,
lower than the government’s forecast of +2.0%.

In the final quarter of 2009, core private orders rose 0.5%
on-quarter, marking the first q/q gain in seven quarters since
January-March 2008. The core orders were still down by 14.0% from a year
earlier in October-December.

In February, the orders in the private manufacturing sector fell
0.3% from the previous month to Y289.9 billion, posting the first drop
in three month following a 3.3% rise in January. The record m/m gain of
25.4% was marked in October 2009.

The decrease in the sector was led by orders for fabricated metal
products, iron and steel, paper and paper products as well as chemical
and chemical products.

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

Core orders for the non-manufacturing sector excluding shipping
lines and power firms fell 4.0% from the previous month to Y391.3
billion, marking the second straight monthly drop after falling 12.9% in
January.

The decline in the sector was led by orders from construction,
transportation as well as finance and insurance.

In November 2009, core orders for the sector tumbled to Y380.7
billion, close to the lowest amount of orders from non-manufacturers at
Y369.0 billion recorded in May 1987.

The total non-manufacturing sector, including shipping lines and
power firms, rebounded by 8.2% m/m, the first rise in two months after
slumping 22.5% in January and surging 38.0% in December.

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 amount of orders from
non-manufacturers is much higher than that from manufacturers.

The telecommunications industry has been hit by stiff price
competition among mobile carriers, showing ups and downs in recent
months.

Orders from finance and insurance, whose capex in merged computer
network systems has run its course, have also fluctuated between gains
and losses.

Outside the core domestic private sector, machinery orders from
overseas continue to fluctuate from month to month, up 8.4% in February
at Y745.3 billion after falling 8.8% in January and rising 20.9% in
December.

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

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MT$$$$]