You are here: Home » International » News » Economy
Business Standard

Japan's rebounding July machinery orders tempered by fragile biz outlook

Corporate Japan is facing strains from steep declines in earnings, discouraging business investment as the economy grapples with its worst postwar slump

Japan | Global economy

Reuters  |  TOKYO 

Photo: Reuters
Photo: Reuters

By Daniel Leussink

TOKYO (Reuters) - Japan's machinery orders rebounded in July from a sharp fall in the previous month, a welcome relief for the coronavirus-stricken but the outlook for capital spending remained uncertain due to fragile global business conditions.

Corporate is facing strains from steep declines in earnings, discouraging business investment as the grapples with its worst postwar slump.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, grew 6.3% in July after a 7.6% decline in June.

The rise was bigger than a 1.9% gain seen by economists in a Reuters poll.

"Corporate earnings are likely to remain in a sluggish state in the second half of the fiscal year," said Takeshi Minami, chief economist at Norinchukin Research Institute.

Orders from manufacturers advanced 5.0%, while those from non-manufacturers gained 3.4%, the Cabinet Office data showed on Thursday.

The government maintained its assessment on machinery orders to say they were on a decreasing trend.

Overseas orders rose for the first time in five months, gaining 13.8% in July from the previous month to highlight a pickup in external demand.

From a year earlier, core machinery orders were down 16.2% in July, not far off an expected 18.3% decline.

The world's third-largest is preparing for a new prime minister for the first time in nearly eight years after Shinzo Abe announced his resignation last month due to poor health.

The country's next leader will face the daunting task of fighting the economic, social and medical fallout from the health crisis while pulling the country out of its worst postwar recession.

The government has already rolled out a combined $2.2 trillion of fiscal stimulus packages to combat the pandemic, adding to an enhanced programme from the Bank of

The central bank will hold its next policy review on Sept. 16-17.

Tom Learmouth, economist at Capital Economics, said he still expected non-residential investment to weaken a little further in the third-quarter despite the uptick in July orders.

"With domestic capital goods shipments falling to their lowest level since 2011 in July, we think business investment weakened further in Q3," he wrote in a note.



(Reporting by Daniel Leussink; Editing by Shri Navaratnam)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, September 10 2020. 09:10 IST