Machinery orders hit two-year low as Japan's recovery slows
By Rie Ishiguro and Leika Kihara |
July 9, 2010, Friday
|
Print Edition
Print Edition
JAPANESE machinery orders tumbled by the most in almost two years in May as companies grew more cautious about the business outlook due to a rising yen and signs of a global economic slowdown.
Bank lending in June also fell, matching the biggest annual decline in almost five years, as demand from companies for funds to invest in plants and equipment remained sluggish.
Bank of Japan Governor Masaaki Shirakawa stuck to the central bank's view that Japan's economy was showing more signs of a moderate recovery, but he and other market watchers voiced concerns about the potential fallout from Europe's debt woes.
A senior government official said there was a risk Japan's economy may enter a lull, after service sector sentiment worsened for two straight months in June.
"Europe's financial problems haven't had an impact yet, but companies are applying the brakes now," said Tetsuro Sawano, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
"People are also worried about a slowdown in the United States later this year."
Core private-sector machinery orders, a highly volatile series regarded as an indicator of capital spending, fell 9.1 percent in May, the biggest decline since August 2008 and far more than the median market forecast for a 3.1 percent decline.
The decline in machinery orders could be a fresh warning sign for the ruling Democratic Party before an upper house election on Sunday.
Public support for new Prime Minister Naoto Kan is slipping as he struggles to convince voters that his party can repair public finances with higher taxes and boost growth with its economic policies. Worries about Europe's debt problems and the health of the global recovery have helped push the yen up more than 5 percent against the United States dollar this year as investors shun riskier assets, which could hurt business sentiment, economists say.
The dollar stood around 88.30 yen yesterday, edging off a seven-month low of 86.96 yen at the start of July.
Machinery orders from manufacturers fell 13.5 percent in May, faster than a 5.5 percent decline the previous month, statistics showed.
The effects of government stimulus measures for energy-efficient electrical appliances have started to dwindle, said Keisuke Tsumura, parliamentary secretary of the Cabinet Office, adding that recovery in capital spending could be slower than anticipated.
The mood among Japanese businesses turned positive for the first time in two years and big firms revised up capital spending plans due to a recovery in exports, a Bank of Japan survey showed earlier this month.
Bank lending in June also fell, matching the biggest annual decline in almost five years, as demand from companies for funds to invest in plants and equipment remained sluggish.
Bank of Japan Governor Masaaki Shirakawa stuck to the central bank's view that Japan's economy was showing more signs of a moderate recovery, but he and other market watchers voiced concerns about the potential fallout from Europe's debt woes.
A senior government official said there was a risk Japan's economy may enter a lull, after service sector sentiment worsened for two straight months in June.
"Europe's financial problems haven't had an impact yet, but companies are applying the brakes now," said Tetsuro Sawano, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
"People are also worried about a slowdown in the United States later this year."
Core private-sector machinery orders, a highly volatile series regarded as an indicator of capital spending, fell 9.1 percent in May, the biggest decline since August 2008 and far more than the median market forecast for a 3.1 percent decline.
The decline in machinery orders could be a fresh warning sign for the ruling Democratic Party before an upper house election on Sunday.
Public support for new Prime Minister Naoto Kan is slipping as he struggles to convince voters that his party can repair public finances with higher taxes and boost growth with its economic policies. Worries about Europe's debt problems and the health of the global recovery have helped push the yen up more than 5 percent against the United States dollar this year as investors shun riskier assets, which could hurt business sentiment, economists say.
The dollar stood around 88.30 yen yesterday, edging off a seven-month low of 86.96 yen at the start of July.
Machinery orders from manufacturers fell 13.5 percent in May, faster than a 5.5 percent decline the previous month, statistics showed.
The effects of government stimulus measures for energy-efficient electrical appliances have started to dwindle, said Keisuke Tsumura, parliamentary secretary of the Cabinet Office, adding that recovery in capital spending could be slower than anticipated.
The mood among Japanese businesses turned positive for the first time in two years and big firms revised up capital spending plans due to a recovery in exports, a Bank of Japan survey showed earlier this month.
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