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First decrease in machinery orders in Japan in three months

A day after Prime Minister Fumio Kishida's coalition administration increased its majority, core orders started to fall.


First decrease in machinery orders in Japan in three months

TOKYO, July 11 (Reuters) - In May Japan's core machinery orders decreased for the first time in three months. It dashed hopes that a rise in business expenditure would relieve pressure on an economy dealing with rising energy and other import prices as a result of a depreciating yen (Currency). A day after Prime Minister Fumio Kishida's coalition administration increased its majority in the upper house of parliament, bolstering the premier's position as leader, core orders started to fall.

According to statistics released by the Cabinet Office on Monday, the core orders highly volatile data series. It was seen to be a predictor of capital expenditure in the next six to nine months. It was decreased by 5.6 percent in May compared to April, marking their first decline in three months. Following a 10.8% growth the month before and a 7.1 increase in March, it was almost perfectly in line with economists' median projection of a 5.5 percent contraction.

Due to the on-going shortages of chips and parts, the growing costs of energy and raw materials, which have been made worse by the weaker yen, Japanese businesses may decide to postpone purchases, which would cause wholesale inflation to surge. While businesses have a strong willingness to invest, Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute, noted that actual capital investment has not expanded significantly on a gross domestic product basis. "Constrained supply is the cause. Despite having orders waiting, manufacturers of machinery claim that chips are not arriving. These are not included in capital expenditures."

Core orders, which do not include erratic figures from shipping and electric power providers, increased 7.4 percent in May compared to a year earlier, the statistics showed. Manufacturing orders were down 9.8% month over month, pushed down by electrical machinery, while non-manufacturing orders fell 4.1 percent, dragged down by a reduction in orders from the transportation and postal sub-sector. The government maintained its appraisal of machinery orders, noting that they were beginning to increase.

The economy is anticipated to rise again in January through March after declining in the first quarter, although the recovery may be less robust than expected. The third-largest economy in the world is facing challenges from rising import costs and China's aggressive pandemic response, which could harm output and consumption in the current quarter.

Source:https://www.reuters.com/markets/asia/japans-machinery-orders-fall-first-time-3-months-2022-07-11/ 

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