March 9, 2018 / 6:20 AM / 10 months ago

Japan January machinery orders seen making a comeback, moderate recovery intact

TOKYO (Reuters) - Japan’s core machinery orders were expected to recover modestly in January as part of a moderate upward trend in capital spending seen by economists, a Reuters poll showed on Friday.

FILE PHOTO: Excavators and heavy equipment rise behind a fence surrounding a construction site in the Shibuya district in Tokyo, Japan, June 3, 2016. REUTERS/Thomas Peter/File Photo

But poll respondents noted that the expected gains in core machinery orders would not be enough to recoup the big falls posted in December, indicating the pace of recovery in capital spending may not be strong as previously thought.

Core orders, a highly volatile data series regarded as an indicator of capital spending in six to nine months, were seen up 5.6 percent in January, the poll of 16 economists found, after they tumbled 11.9 percent in December - the fastest fall in more than three years.

From a year ago, core orders, which exclude those for ships and from electric power utilities, were projected to rise 0.6 percent in January after a 5.0 percent drop in December.

“The yen’s recent strength could be a concern as foreign demand will continue to be a major factor for Japan’s economic growth for the coming fiscal year,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in the survey.

“If companies were to become more cautious over the yen’s appreciation, the risk of a reduction in machinery orders, would increase and that would lower capital spending.”

The yen stood around 106.60 yen against the dollar JPY=EBS on Friday after surging to a 16-month high last week on concerns U.S. President Donald Trump's new tariffs on imported steel and aluminum could lead to a trade war.

Fears of a global trade war receded as Trump softened his stance by announcing exemptions for Canada and Mexico, and leaving open the possibility for other countries to obtain exemptions.

Japan’s economy expanded more than initially estimated in the last quarter of 2017, thanks to an upward revision of capital expenditure and inventory data, confirming the longest run of growth in 28 years.

The Cabinet Office will release the machinery orders data at 8:50 a.m. Japan time on March 14 (2350 GMT March 13).

The corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services, was expected to grow 2.6 percent in February, up for a 14th straight month.

The Bank of Japan will release the CGPI data at 8:50 a.m. Japan time on March 13.

Reporting by Kaori Kaneko; Editing by Eric Meijer

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