— Adds Official, Economist Comments, Details From 11th Paragraph
— Japan Apr Machine Orders MNI Poll Median Forecast +1.9% M/M
— Japan Apr New Core Machinery Orders Post 1st M/M Drop In 4 Mo
— Japan Q2 Core Machine Orders Seen +10.4% Q/Q; Q1 +5.6%
— Japan Gov Repeats: Machine Orders Picking Up With Soft Spots
— Japan New Core Machine Orders Exclude Mobile Handsets
— Japan Apr Core Machinery Orders -0.2% Y/Y; Mar +9.1%
— Japan Apr Core Machinery Orders Post 1st Y/Y Drop in 4 Months
— Japan Apr Machine Orders From Overseas -2.1% M/M; Mar -10.8%
— Japan Apr Machine Foreign Orders Post 2nd M/M Drop In Row

TOKYO (MNI) – Japan’s core private-sector machinery orders
unexpectedly fell 3.3% in April from March, marking the first drop in
four months, but are forecast to rise 10.4% in the April-June quarter
from Q1, data from the Cabinet Office showed on Monday.

The Cabinet Office has completely removed orders for mobile
handsets from the key core machinery orders figure — starting with
April data — so that the data give a clearer picture of the trend in
demand. However, the change was not to blame for the drop in April.

There were some cancellations of orders caused by the March 11
earthquake disaster but the government said it does not know how much
these cancellations affected core orders.

In March, core machinery orders rose a seasonally adjusted 1.0%,
with the pace of growth slowing from +1.7% in February and +4.0% in
January, but showed no direct impact of the March disaster.

The April core figure came in much weaker than the 1.9% m/m rise
expected in the median forecast in a MNI survey of economists.

But the Cabinet Office more or less maintained its longer-term
assessment, saying: “Machinery orders are picking up but there are weak
spots in some areas.”

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

In April, core private machinery orders fell 0.2% from a year
earlier, marking the first y/y drop in four months after +9.1% in March.

Offshore orders, which are not part of core orders, dropped 2.1%
month on month in April following -10.8% in March and +6.7% in February,
both revised.

Core machinery orders are forecast to rise 10.4% in the second
quarter from the previous three months, a second straight quarterly
rise, following the 5.6% gain in the first quarter, according to a
survey of companies by the Cabinet Office.

In order for core orders to rise 10.4% in Q2, as forecast by firms,
they would have to grow 12.3% m/m in each of May and June, which seems
difficult to achieve, a Cabinet Office official told reporters.

Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley
Securities Co, said that an unexpected decline in April machinery orders
appears to be a blip and was probably caused by cancellations of some of
previously placed orders in the aftermath of the March 11 earthquake.

“Such a temporary move may continue to weigh on the trend of
machinery orders until May,” he said.

“But judging from a steady recovery in industrial output and the
progress made in reconstruction efforts by the private sector and the
government, machinery orders are apparently not headed for a further and
sustained decline ahead. They are expected to gain traction.”

Production at the nation’s factories and mines rose a seasonally
adjusted 1.0% in April from the previous month, and it is expected to
rise 8.0% in May and by a further 7.7% in June, as manufacturers are
rushing to restore quake-ravaged supply chains for cars and electronics.

In April core machinery orders from the manufacturing sector fell
2.7% m/m to Y319.4 billion, the second straight m/m drop after -0.8% in
March. But its orders are expected to jump 15.0% q/q in April-June
following +5.3% in January-March.

The decline was led by orders for general machinery, electrical
machinery, iron and steel as well as chemical and refined petroleum
products. Autos and auto parts showed a rebound after a drop in March.

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.

Orders from the non-manufacturing sector, excluding demand for
ships and from power firms, totaled Y405.8 billion in April, up 2.9% m/m
after rising only 0.1% in March.

The rise was led by orders from real estate and information
services.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4835 **

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