Japan machinery orders to fall in Nov as coronavirus crisis weighs: Reuters poll

A chimney of a factory is seen at the Keihin Industrial Zone in Kawasaki
FILE PHOTO: A chimney of a factory is seen at the Keihin Industrial Zone in Kawasaki, Japan September 12, 2018. REUTERS/Kim Kyung-Hoon

January 8, 2021

TOKYO (Reuters) – Japan’s core machinery orders likely dropped in November after the previous month’s jump, a Reuters poll showed on Friday, and a renewed state of emergency in the Tokyo area could dampen firms’ capital spending even further.

The economy rebounded sharply in the third quarter from its biggest postwar slump but the emergency status in the region and rising coronavirus cases are clouding the recovery path for the world’s third-largest economy.

Core machinery orders, widely considered an indicator of capital spending in the next six to nine months, likely fell 6.2% in November from the previous month, the fastest rate of decline since June, when orders fell 7.6%, according to the poll of 19 economists.

In October, core machinery orders grew 17.1%, the largest month-on-month rise since comparable data became available in 2005.

The highly volatile data is expected to show core orders, excluding those for ships and electrical utilities, likely fell 15.4% in November from a year earlier after rising 2.8% year-on-year in October.

“Firms remained cautious about capital spending due to worsening corporate earnings,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“In addition, a state of emergency could put downward pressure on the economy and the capital spending recovery could be delayed.”

The government will release machinery order data at 8:50 a.m. Japan time on Thursday (2350 GMT on Wednesday).

The Bank of Japan’s corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services, likely fell 2.2% in December from a year earlier, the same rate of decline posted in November, the poll found.

Weak prices in electricity and city gas continued weighing on the CGPI index, analysts said.

The central bank will publish CGPI at the same time as the government’s machinery orders.

The current account balance, which will be released on Tuesday, is expected to show a surplus of 1.551 trillion yen ($14.94 billion) in November, the poll showed, down from 2.14 billion yen in October, partly due to weak income from investments overseas.

(Reporting by Kaori Kaneko; Editnig by Kim Coghill)