Trade
5 years ago

Foreign demand for Japanese machinery slumps by most since 2007

Heavy machineries are seen next to a subway train at a construction site in Tokyo, Japan, March 13, 2016. REUTERS/Yuya Shino
Heavy machineries are seen next to a subway train at a construction site in Tokyo, Japan, March 13, 2016. REUTERS/Yuya Shino

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Overseas orders for Japanese machinery posted their biggest tumble in more than a decade in December, as trade frictions dented global supply chain demand and manufacturers predicted further declines in orders this quarter.

Data released on Monday showed core machinery orders, considered a leading indicator of capital expenditure, fell 0.1 per cent month-on-month in December. This was the first decline in three months but was smaller than the median forecast for a 1.1 per cent decrease, according to a Reuters report.

Highlighting bigger concerns about the external environment, however, was a 21.9 per cent month-on-month slump in orders from overseas, the biggest fall since November 2007.

The Cabinet Office data comes as some of Japan’s major corporates flag expected hits to sales to customers, which include downstream manufacturers who use Japanese components, amid an increasingly cautious investment environment.

“Capital expenditure won’t be that strong, and this will hamper Japan’s overall growth,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“We see the impact of trade friction. There’s a lot of uncertainty and manufactures are becoming more cautions.”

A Cabinet official told reporters at a briefing the slump was partly due to the base effect of large overseas orders seen over the past two months. However, forecasts show manufacturers expect overseas orders to fall by another 17.1 per cent in the current quarter.

Manufacturers surveyed by the Cabinet Office forecast core orders will fall 1.8 per cent in January-March after decreasing 4.2 per cent in October-December.

The Cabinet Office said in a statement machinery orders were “stalling”, a downgrade to its previous assessment, which described orders as “recovering but showing signs of stalling”.

Quarterly data for the October-December period showed the broader decline in orders was driven by weakness in the chemicals, electronics, logistics., and construction sectors.

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