MNI BRIEF: Japan's Sept Machine Orders Fall; Outlook Lowered
Bank of Japan officials will be vigilant about the outlook for capital investment following weak machinery orders for September, which aren’t consistent with strong capex plans in the BOJ's September Tankan survey.
Japan's core machinery orders, which exclude volatile orders from power generation equipment and ships, fell 4.6% m/m in September, data released by the Cabinet Office Wednesday showed. It was a second straight drop following a 5.8% decline in August. The data showed orders for the third quarter are expected to rise 3.6% q/q following a 1.6% decline in the second quarter. The three-month moving average of core orders fell 1.8% in August after being unchanged in July.
The government lowered its assessment, saying that a recovery of machinery orders is "marking time". The previous view was machinery orders showed signs of recovering. However, the BOJ will unlikely change its view on capex immediately due to the machinery orders data as it is a leading indicator of capex but fluctuates sharply month-on-month.
Bank officials will carefully examine whether capital investment will remain solid through upcoming economic data, including the December Tankan survey due out Dec. 14, before the December 19-20 policy decision meeting. (See MNI: BOJ Buoyed by Tankan View On Prices, Capex)