Japan June Core Machine Orders Down; Q3 Rebound Expected

--Japan June Core Machine Orders -1.9% M/M; MNI Median +4.5%

--Japan Apr-June Core Machine Orders -4.7% Q/Q; Govt Forecast -5.9%

--Japan Govt Sees July-Sep Core Machine Orders +7.0% Q/Q

--Japan Govt Maintains View: 'Machine Orders Marking Time'

     TOKYO (MNI) - Machinery orders data released by the Cabinet Office on

Thursday:

     * Japan's core private-sector machinery orders, which exclude volatile

orders for power generation equipment and ships, unexpectedly fell 1.9% on month

to a 13-month low of Y790.0 billion in June. But government officials expect a

rebound in the July-September quarter, arguing the leading indicator of business

investment is taking a breather.

     * The drop in June was the third straight month-on-month decrease after

-3.6% in May and -3.1% in April. The median economist forecast in an MNI survey

was for a 4.5% rise on month (forecast range: +1.1% to +7.0%). Core orders fell

5.2% from a year before, the first drop in three months after +0.6% in May and

+2.7% in April.

     * The Cabinet Office left its assessment unchanged after downgrading it

last month, saying "Machinery orders are marking time."

     * In the April-June quarter, core machinery orders slumped 4.7% from the

previous quarter, posting the second consecutive drop after falling 1.4% in the

first quarter. The second quarter decline was a bit smaller than the government

forecast for a 5.9% drop.

     * The Q2 drop was largely in payback for large-scale orders for nuclear

power turbines and aircraft in the previous period. It was also in reaction to

rush purchases of construction machines before the government's tighter emission

controls take effect in September.

     * The government expects core orders to rebound 7.0% from the previous

quarter in July-September, led by demand from the non-manufacturing sector

(+13.5% q/q expected) for industrial machines used by transportation and other

distribution firms. Orders for train cars and computers are also expected to

lead the Q3 increase.

     * "The recent trend shows that automakers and other manufacturers are

investing in equipment to cope with labor shortages. Orders for industrial

robots fell in June but they remain on an uptrend," the official said.

     * In June, orders from the manufacturing sector fell 5.4% on month, the

first drop in four months, led by lower demand from "other manufacturers" for

industrial robots as well as boilers and turbines after recent gains. Orders

from communications equipment makers and shipbuilders were also lower.

     * "Orders from the manufacturing sector had risen for four straight months

through May, so the drop in June alone does not indicate a downtrend," a Cabinet

Office official said.

     * Orders from the non-manufacturing sector rose 0.8% in June, the first

rise in four months after falling 5.1% in May, but they slumped 9.9% on quarter

in April-June, the first drop in two quarters.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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