Bloomberg News

Japan Machine Orders Fall More-Than-Estimated 7.1% as Yen Climbs

February 09, 2012

Feb. 9 (Bloomberg) -- Japan’s machinery orders fell at the fastest pace in three months in December as a faltering global economy and gains by the yen dimmed the outlook for exporters.

Bookings, an indicator of capital spending, decreased 7.1 percent from the previous month, the Cabinet Office said in Tokyo today, after surging 15 percent in November. The median estimate of 29 economists surveyed by Bloomberg News was for a 5 percent decline.

Japan’s exports fell for three straight months through December as European leaders grappled with the debt crisis that is driving the euro region into a recession. Spending may rebound as earthquake reconstruction work kicks in and today’s report showed companies forecasting a 2.3 percent increase in orders this quarter.

“Growing uncertainties over the global economy and the yen’s gains could discourage companies” from spending, said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research in Tokyo. At the same time “it’s unlikely that capital spending will turn into a declining trend in coming months because of reconstruction demand,” he said.

Japan’s currency climbed to a post-World War II high of 75.35 per dollar on Oct. 31, eroding profits at exporters such as Sharp Corp. and Honda Motor Co. The yen traded at 77.13 in Tokyo as of 10:02 a.m., from 77.05 before the report.

‘Severe’ Condition

Bank of Japan Governor Masaaki Shirakawa said this week that the economy is in a “severe” condition because of deflation and gains in the yen.

Japan’s lower house of parliament on Feb. 3 approved Prime Minister Yoshihiko Noda’s 2.5 trillion yen ($32 billion) recovery package from the earthquake and tsunami, the fourth supplementary budget since the disaster. The government forecast in December that Japan’s economy will grow 2.2 percent in the year starting April after a projected 0.1 percent contraction this fiscal year.

The International Monetary Fund estimates that Japan’s economy will grow 1.7 percent this year, compared with a likely 1.8 percent expansion for the U.S. and an estimated 0.5 percent contraction for the euro area.

--With assistance from Theresa Barraclough, Lily Nonomiya and Keiko Ujikane in Tokyo. Editors: Lily Nonomiya, Iain Wilson

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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