Japan January Core Machinery Orders Plunge, but Recovery Eyed
Japan's core machinery orders plunged in January from the previous month, falling for the first time in four months and suggesting companies are cautious on capital spending due to uncertainty over the economy's outlook.
The 13.1 percent drop from December reported by the Cabinet Office on Monday was much deeper than a median market forecast for a 2.0 percent monthly decline and followed a 2.8 percent increase in December.
The data tend to be volatile, and so did little to change analysts' dominant view that the world's third-largest economy is emerging from a slump with the help of Prime Minister Shinzo Abe's policy mix of monetary and fiscal stimulus.
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"The fall was bigger than expected but I still would say this is temporally fall," said Takeshi Minami, chief economist at Norinchukin Research Institute.
"The yen's weakness helps expectations for exports to pick up and business sentiment has been also improving," he said, adding he expected capital spending to gradually pick up in the fiscal year starting in April.
Compared with a year earlier, core orders, which exclude those of ships and power utilities and are regarded as an indicator of capital spending in the coming six to nine months, fell 9.7 percent in January.
Last week, the BOJ revised up its assessment of the economy to say it was bottoming out, and held monetary policy steady.
The BOJ is expected to take action at its April 3-4 meeting after the expected appointment of Haruhiko Kuroda, a vocal advocate of aggressive easing, as governor later this month.
Data last week showed the economy stabilized in the fourth quarter after two quarters of contraction. Analysts project the economy will grow around 2.0 percent in the fiscal year from April, helped by a weaker yen and improving global demand.