Japan’s machinery orders, wholesale prices sink as pandemic hits spending

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TOKYO- Japan’s machinery orders slumped in April at their quickest pace in nearly two years, as a drop in demand and company profits caused by the coronavirus pandemic paralyzed businesses spending.

Separate data showed May wholesale prices fell at the fastest annual pace in nearly four years, keeping alive market fears Japan may slide back into deflation.

The weak readings will pressure policymakers to take bolder action to support an economy already headed for deeper recession caused by the pandemic.

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Core machinery orders, often regarded as an indicator of capital spending in the coming six to nine months, tumbled 12.0 percent in April from the previous month, Cabinet Office data showed on Wednesday.

The drop was larger than an 8.6 percent decline seen by economists in a Reuters poll and the fastest decline since September 2018.

“It’s hard to expect improvements in overall machinery orders unless overseas economic conditions recover and Japanese exporters boost investment domestically,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.

The world’s third-largest economy fell into recession in the last quarter, although firmer capital expenditure remained one of the few bright spots as demand for machinery and big ticket items held up.

The fall in machinery orders in April suggests that resilience in business investment is now also giving way, a sign the recession is likely to deepen in the current quarter.

Overseas orders dropped 21.6 percent from the previous month for their biggest tumble since April 2019, highlighting growing concerns about the external environment.

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