According to a preliminary report released by the Cabinet office, Japanese core machinery orders fell 4.5% on month in March, following a 4.9% decline in the prior month. Analysts were looking for a 1.5% increase in March.
The total value of core machinery orders, which exclude those from electric power companies and ships manufacturing, fell a seasonally adjusted 4.5% in March from the previous month to 990.7 billion yen. Annually, total value declined a seasonally unadjusted 5.8%, the report said. During the first quarter, the core machinery orders declined 0.7% sequentially, compared to a 0.3% rise in the prior quarter.
The latest results fell short of expectation as the Bank of Japan`s Tankan business survey for the March quarter, released last month, indicated that Japan`s largest manufacturers had plans to increase spending by 2.5% in the current fiscal year.
The outlook for corporate capital expenditure appeared gloomy as companies expect a 11.8% fall in core machinery orders in the second quarter as well. The overall orders are expected to ease 3.3% during the same period.
The report also showed that machinery orders from the manufacturing sector slumped 7.5% in March, following an 8.4% decline last month. Manufacturing companies anticipate an 11.7% decline in the second quarter.
Meanwhile, the core machinery orders from non-manufacturing sector fell 2.5% in March, after slipping 1.5% in the prior month, while orders from government sector and overseas companies fell 47.5% and 11.3%, respectively.
Among the fifteen manufacturing sectors, orders declined in thirteen, with textile-manufacturing industries recording the largest fall of 80.1% from the prior month.
Orders declined in six of the eight segments in the non- manufacturing sector.
The unexpected weak outcome of machinery orders in March and the decline in the forecast for the second quarter suggest that corporate capital expenditure is decelerating, further hindering growth. Some economists believe that this will force the central bank to delay rate hike further. The BoJ`s Monetary policy committee is scheduled to announce its next policy decision on Thursday.
At its April 28 meeting, the Policy Board unanimously voted to hold the overnight call rate target unchanged at 0.5%. On February 21, the Board decided to raise rates by 25 basis points to 0.5%, reasoning that the economy is likely to continue its moderate expansion, with a virtuous circle of production, income and spending in place.
Japan`s economy staged a strong rebound in the fourth quarter, registering growth of 1.3% sequentially, compared to 0.1% growth in the prior quarter. Capital expenditure contributed significantly, recording 3.1% growth from the prior quarter, reversing a 0.2% dip in the third quarter.
The government is due to release the GDP report for the first quarter on May 17.
In the currency market, Japanese yen fell sharply against the Greenback, amid the release of the data. However the US dollar has since then pared some of its gains and the pair is trading near 120.4 currently.
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