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MNI (London)
--Signs China Slowdown May Be Starting To Weigh On Japan Manufacturers
By Hiroshi Inoue
     TOKYO (MNI) - With no sign of an upturn in core machine orders in November,
Bank of Japan concern is increasing as to whether capital investment will
continue as a main driver for an economic recovery, MNI understands.
     However, the BOJ is unlikely to change the assessment "capital investment
has continued on an increasing trend" as the data tends to sharply fluctuate
month-on-month.
     BOJ officials continue to closely monitor capital investment plans in the
current fiscal year, although there is a focus on FY 2019 capital investment
plans -- expected when the BOJ March Tankan business sentiment survey is
published on April 1 -- and whether they deviate from historical averages.
     Those officials are also worried over the risk that the financial market
volatility seen around the turn of the year, if repeated, will sour business
sentiment and impede corporate capital investment.
     --WEAKER NOV ORDERS
     Japan's core machinery orders, excluding volatile orders for power
generation equipment and ships, fell 0.0% (officially rounded up from -0.02%) on
month in November, data released by the Cabinet Office Wednesday showed, missing
analyst expectations that looked for a gain of 3.3%.
     The unrounded number was the first month-on-month drop in two months and
followed a 7.6% gain in October, perhaps indicating capital investment was
affected by China's slowing economy and uncertainties caused by the U.S.-China
trade dispute.
     --HARD DATA EYED
     However, the data, a leading indicator for capital investment, fluctuates
sharply month-on-month and BOJ economists will eye visible economic data to
examine how Japan's capital investment, production and exports have been
affected by the trade friction.
     The three-month moving average of core orders fell 4.5% in November from
the previous three-month period, marking the third straight drop following -2.0%
in October and -0.9% in September.
     --GOVT KEEPS VIEW
     The Cabinet Office kept its assessment from October, saying, Japan Govt
Keeps View: "pickup of orders is marking time."
     Orders from the manufacturing sector fell 6.4% on month in November, the
first drop in two months after +12.3% in October, while orders from the
non-manufacturing sector excluding those for power generation and ships rose
2.5% on month, the second straight rise after +4.5% in October.
     --LIMITED IMPACT
     BOJ economists acknowledged that China's slowing economy is gradually
affecting activities at Japanese companies via the quarterly branch managers'
meeting on Jan. 10, following meetings and discussions with companies.
     However, they judged that the direct impact was limited.
     The BOJ's quarterly regional economic report showed that all nine regions
saw their economies either expanding or recovering, which may indicate the
limited impact on Japan from global headwinds.
     But the regional report also said, "Although the impact of uncertainties
regarding overseas economies, including the trade friction between U.S. and
China, has been limited thus far, a gradually increasing number of firms are
pointing to some effects, such as a decline in orders."
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MMJBJI,MAJDS$,MMJBJ$,M$A$$$,M$J$$$,MT$$$$,MX$$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com