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JAPAN DATA: Core Machine Orders Paint Positive Capex Backdrop

JAPAN DATA
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Japan Nov core machine orders data comfortably beat expectations. We were up 3.4%m/m, versus -0.8% forecast (prior was +2.1%). In y/y terms we rose 10.3%, against a 4.2% forecast (prior as 5.6%). 

  •  The +10%y/y print for core machine orders was back close to 2024 highs. Momentum recovered strongly through Q4 and was mostly ahead of market expectations. In terms of the detail, the non-core items were quite volatile (which is typically the case). In y/y terms, manufacturing orders were 15.3% y/y, versus 7.6% prior. Non-manufacturing was 6.8% from 27.7% in Oct.
  • The chart below overlays this print against Japan capex spending (ex Software) in y/y terms. It suggests a firm capex backdrop prevailed into year end for Japan.
  • This isn't a key watch point for the BoJ, with wages and inflation more in focus, but still will be welcomed ahead of Friday's policy outcome. It is a sign of a resilient economic backdrop. 

Fig 1: Japan Core Machine Orders (White Line) versus Japan Capex, Ex Software (Y/Y)

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Japan Nov core machine orders data comfortably beat expectations. We were up 3.4%m/m, versus -0.8% forecast (prior was +2.1%). In y/y terms we rose 10.3%, against a 4.2% forecast (prior as 5.6%). 

  •  The +10%y/y print for core machine orders was back close to 2024 highs. Momentum recovered strongly through Q4 and was mostly ahead of market expectations. In terms of the detail, the non-core items were quite volatile (which is typically the case). In y/y terms, manufacturing orders were 15.3% y/y, versus 7.6% prior. Non-manufacturing was 6.8% from 27.7% in Oct.
  • The chart below overlays this print against Japan capex spending (ex Software) in y/y terms. It suggests a firm capex backdrop prevailed into year end for Japan.
  • This isn't a key watch point for the BoJ, with wages and inflation more in focus, but still will be welcomed ahead of Friday's policy outcome. It is a sign of a resilient economic backdrop. 

Fig 1: Japan Core Machine Orders (White Line) versus Japan Capex, Ex Software (Y/Y)

image