Japan`s core machinery orders hit lowest level on record in July

TOKYO, Sept. 10 Kyodo -
Japanese core private-sector machinery orders hit their lowest level on record
in July amid weak demand from manufacturers, government data showed Thursday,
adding to signs that corporate appetite for fresh capital spending remains weak
after the global economic slowdown.
The core orders, which exclude those for ships and from electric utilities,
fell a seasonally adjusted 9.3 percent from the previous month to 664.7 billion
yen ($7.22 billion), the lowest level since comparable data became available in
April 1987 and the first decline in two months.
The rate of fall was much faster than the average market forecast of a 3.6
percent contraction in a Kyodo News survey.
Japan's notoriously volatile machinery orders last hit a record low in May when
they stood at 668.2 billion yen. In June, however, they marked an upturn,
rising 9.7 percent.
''The pace of decline is getting moderate,'' the Cabinet Office said in its
basic assessment of machinery orders, using the same expression since March.
The latest result came as orders from manufacturers turned negative, down 20.4
percent to 223.7 billion yen for the first fall in three months.
Orders from the nonferrous metal industry fell 85.7 percent due mainly to
declines in such products as turbines for nuclear power plants and
metal-processing machines. Those from general machinery makers slid 32 percent
while orders from transport equipment manufacturers except for carmakers lost
50.1 percent on weak demand for aircraft and train cars, the office said.
Nonmanufacturers also performed poorly with orders falling 2.8 percent to 439.6
billion yen for the first decrease in two months, led by the mining,
telecommunications and transportation industries.
Core orders are widely seen as a leading indicator of corporate capital
spending about six months ahead.
The sluggishness in the data came in sharp contrast with recent advances in
industrial production, which continued to rise for five months running through
July and supported the view the country's economy has bottomed out.
''If the upward momentum in production is more firmly fixed, companies' capital
spending will return with a time lag,'' a Cabinet Office official said,
justifying the decision not to downgrade the government's basic assessment.
The total value of machinery orders to 280 selected machinery makers in Japan,
including those placed by the public sector and from overseas, was up 7.5
percent in the reporting month to 1,657.1 billion yen for the third straight
monthly rise.
Overseas demand, an indicator of future Japanese exports, grew 21.8 percent to
549.9 billion yen for the second consecutive month of gain.
Masamichi Adachi, a senior economist at JPMorgan Securities Japan Co., called
attention to returning strength in orders from abroad.
''Some areas and sectors have already started to move'' into a recovery phase,
Adachi said, especially stressing improvement in Asian economies. Machinery
orders ''are expected to return once the global economy starts its recovery.''
==Kyodo