By Kantaro Komiya
TOKYO- Japan’s core machinery orders rose 3.4 percent in November from the previous month to beat analysts’ forecast, government data showed on Monday, signaling a recovery in capital expenditure ahead of a central bank interest rate review later this week.
The reading was stronger than a 0.4 percent decline estimated in a Reuters poll and marked a second consecutive month of increase. Orders from manufacturers rose 6.0 percent, while those from “core” non-manufacturers excluding the ship and electricity sectors rose 1.2 percent.
“Demand for capital investment in response to labor shortages and digitalization remains strong,” said Masato Koike, senior economist at Sompo Institute Plus.
Manufacturers’ business sentiment improved over the past month, though their outlook is clouded by uncertainties including the incoming US Trump presidency, the Reuters Tankan survey showed last week.
Moreover, any direct impact of a central bank rate hike on capital investment seems “minor at the moment”, Koike said.
The Bank of Japan is likely to raise interest rates at its Jan. 23-24 policy meeting, barring any market shocks after Donald Trump takes office, sources have told Reuters.
On a year-on-year basis, core machinery orders – a highly volatile data series regarded as a leading indicator of capital spending in the coming six to nine months – increased 10.3 percent, better than a forecast for 5.6 percent growth, Monday’s data showed.
The Cabinet Office raised its assessment of machinery orders, saying it sees signs of improvement.
Japan’s exports rose faster than expected in November, data showed, helped by a weaker yen and solid global demand although businesses worry protectionist US trade policies will undermine future growth.
Total exports rose 3.8 percent year-on-year in November, more than a median market forecast for a 2.8 percent increase and following a 3.1 percent rise in October.
Strong chipmaking equipment exports to Taiwan and China, coupled with a weaker yen, boosted the overall value.
But volumes dipped 0.1 percent, suggesting growth in value largely reflected the boost from the yen’s weakness.
Looking ahead, exports are likely to stay flat, as strong demand for chipmaking equipment is offset by a moderate US slowdown as well as risks from President-elect Donald Trump’s trade policies.
Exports to China, Japan’s biggest trading partner, rose 4.1 percent in November from a year earlier, while those to the United States were down 8 percent due to a drop in automobile exports, the data showed.
Imports dropped 3.8 percent in November from a year earlier, compared with market forecasts for a 1 percent increase.
As a result, Japan ran a trade deficit of 117.6 billion yen ($766.17 million) in November, smaller than the forecast deficit of 688.9 billion yen. —Reuters