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REPEAT: MNI ANALYSIS: Japan Q4 Machine Orders Show Solid Capex

--Japan Dec Core Machine Orders -11.9% M/M; MNI Median -1.8%
--Japan Dec Core Machine Orders Post 1st M/M Drop in 3 Months
--Japan Q1 Core Machine Orders Seen +0.6% Q/Q; Q4 -0.1%
--Japan Govt Keeps View: Machine Orders Show Signs of Pickup
By Max Sato 
     TOKYO (MNI) - Japanese machinery orders posted a sharp drop in December in
payback for earlier large gains in data released Thursday, but the government
maintained its view that signs of a pickup are intact, judging from firmer Q4
results and a projected gain in the first quarter of 2018.
     This piece of data suggests solid demand for business investment in
equipment will continue for now following Wednesday's GDP data that showed
modest but sustained economic growth in the October-December quarter was led by
private consumption and capital investment.
     Orders for chip-making machines and other general machinery are on a clear
uptrend, reflecting global demand for semiconductors, while demand for
industrial robots remains strong. Companies are trying to make their operations
more efficient amid serious labor shortages in some sectors.
     "On the other hand, orders related to automobiles have been sliding. We
have to see how they will go," a Cabinet Office official said.
     --SHARP M/M FLUCTUATIONS
     Core private-sector machinery orders, which exclude volatile orders for
power generation equipment and ships, slumped 11.9% on month in December after
solid gains of 5.7% in November and 5.0% in October, mainly in reaction to sharp
one-off rises in orders from non-ferrous metal makers as well as the wholesale
and retail sector in November.
     The decrease was sharper than the MNI survey median forecast for a 1.8%
drop (forecast range: from +4.8% to -4.4%) and the largest since -15.3% in May
2014. The level of core machinery orders at Y792.6 billion in December was the
lowest since Y790.0 billion in June 2016.
     --GRADUAL PICKUP INTACT
     "The three-month moving average to December fell only 0.7% from the
previous three-month period, after rising 0.7% in September-November, so we left
our view unchanged," the official said.
     The Cabinet Office maintained its assessment that "machinery orders are
showing signs of a pickup" but added they marked a sharp drop in December.
     In October-December, core orders fell just 0.1% on quarter, coming in
firmer than the official forecast for a 3.5% drop.
     For January-March, the Cabinet Office projected a 0.6% increase in core
orders, the first rise in two quarters. Demand for boilers and turbines is
expected to lead the gain while orders for industrial machines is forecast to
slip.
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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