TOKYO- Japan’s core machinery orders fell more than expected in July, as manufacturers balk at new investments in the face of sluggish global growth and weakness in major market China, pointing to a difficult period ahead for the world’s third-largest economy.
The Cabinet Office data released on Thursday comes on top of several other indicators over recent weeks that have raised the challenge for Japanese policymakers confronting soft demand overseas and at home.
Core orders, the leading indicator of Japanese business spending, were down 1.1 percent in July from the previous month, the data showed. The decline was bigger than a 0.9 percent drop expected by economists in a Reuters poll and followed a 2.7 percent gain in June.
“Export-reliant manufacturers are hesitant at ramping up investments in the wake of anaemic Chinese economy and Western central banks’ relentless tightening,” said Chisato Oshiba, economist at Dai-ichi Life Research Institute.
“Manufacturers are eager to invest in their production facilities, but uncertainties overseas discourage their decisions … at least through September.”
Orders from manufacturers fell 5.3 percent in July, the largest decline in eight months, due to weak demand for computers from industries including electric machinery, auto and chemicals. Orders from “core” service-sector firms excluding shipping and electric utilities grew 1.3 percent .
On a year-on-year basis, core orders, a highly volatile data series regarded as a gauge of capital spending in the coming six to nine months, contracted 13.0 percent , larger than a forecast for a 10.7 percent fall, the data showed.
The government maintained its weak view on machinery orders, saying they are “stalling”, highlighting the bumpy road ahead for Japanese business and its broader economy.
High borrowing costs across many developed economies, with the US Federal Reserve leading the charge since early last year, have hurt global growth and many trade-reliant nations such as Japan.
That has in turn made the Bank of Japan (BOJ) wary about speeding up an exit from its ultra-easy policy, a cautious stance underlined by a raft of soft economic indicators.
In July, Japan’s exports fell for the first time in nearly 2-1/2 years, while the industrial output contracted more than expected.
Confidence at big Japanese manufacturers fell the most in eight months, on worries a slowdown in China’s economy could be a bigger drag on growth globally and at home, a Reuters corporate survey for September showed on Wednesday.
