MNI INSIGHT:BOJ Sees Capex Working Despite Drop in Sept Orders

By Hiroshi Inoue

     TOKYO (MNI) - Officials at the Bank of Japan are more focused on the

quarterly movement of economic data to examine the underlying trend and not

overly concerned with September's record drop of machinery orders, MNI

understands. 

     BOJ Officials are looking into how orders as well as exports and production

may rebound in or after October. While September's machinery orders plunged

18.3%, it was an expected outlier resulted from unusual natural disasters in

August. 

     BOJ officials as well as private economists expected major economic

component, such as exports, production and machinery orders, to have temporary

have fallen in the third quarter due to storms and an earthquake.

     BOJ officials maintain the view that the virtuous cycle from profits to

spending continue working as no particular postponement of planned investment

have been observed.

     The 18.3% monthly decline in core machinery orders, excluding volatile

orders for power generation equipment and ships, followed +6.8% in August and

+11.0% in July, data released by the Cabinet Office Thursday showed. The drop

was observed in both manufacturers and non-manufacturers.

     Machinery orders for the third quarter as a whole still rose 0.9% following

+2.2% in the second quarter. The orders in the fourth quarter are expected to

rise 3.6%.

     The three-month moving average of core orders fell 0.9% in September

following +2.8% in August.

     The Cabinet Office largely kept its assessment from the previous month,

saying "orders show a sign of picking-up" after falling sharply in September.

     Orders from the manufacturing sector fell 17.3% on month in September after

+6.6% in August and +11.8% in July. Orders from the non-manufacturing sector

excluding those for power generation and ships also fell 17.1% on month,

following +6.0% in August and +10.9% in July.

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

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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