TOKYO: Japan’s core machinery orders rose for a second straight month in November in a sign that companies may gradually increase capital spending, but uncertainty over the global economy could continue to pressure the Bank of Japan to ease policy.
Core machinery orders, a highly volatile data series seen as a leading indicator of capital spending in the coming six to nine months, rose 3.9 per cent in November from the previous month, more than a 0.3 per cent gain expected by economists in a Reuters poll, data from the Cabinet Office showed.
The positive data on corporate spending is welcome but will do little to ease pressure on the BOJ to deliver further monetary stimulus as the central bank faces intense calls from Prime Minister Shinzo Abe to pursue aggressive monetary easing to end years of deflation.
“There is a high possibility that machinery orders will recover early this year, helped by the global economic recovery as China’s economy also seems to have hit the bottom,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance.
“Although the economy shows signs of having hit bottom, the central bank’s regional economic report showed most of the regions’ economies are still weak. So the central bank is likely to implement additional easing.”
Compared with a year earlier, core orders, which exclude those for ships and electric power utilities, increased 0.3 per cent in November, versus the median estimate for a 6.5 per cent annual fall, the Cabinet Office data showed.
Wholesale prices fell 0.6 per cent in the year to December, separate data from the BOJ showed, versus the median forecast for a 0.7 per cent decline in a Reuters poll.
Japan’s capital spending has lacked momentum as companies delay business expenditures due to uncertainty over global growth prospects, while a boost from post-disaster reconstruction has not played out as strongly as expected.
Highlighting a struggle of the export-reliant economy, Japan’s current account swung to a much bigger than expected deficit in November after the nation’s trade gap hit a 10-month high.
Analysts expect exports and the broader economy will pick up gradually along with the global recovery, helped by the yen’s weakening due to BOJ easing and Abe’s aim of more expansionary fiscal and monetary policy.