Japan's Aug machinery orders rise for second straight month

Credit: REUTERS/Naomi Tajitsu

Japan's core machinery orders unexpectedly rose in August from the previous month, posting a second straight month of gains and highlighting resilience in capital spending even as the economy remains under pressure from the coronavirus pandemic.

By Daniel Leussink

TOKYO, Oct 12 (Reuters) - Japan's core machinery orders unexpectedly rose in August from the previous month, posting a second straight month of gains and highlighting resilience in capital spending even as the economy remains under pressure from the coronavirus pandemic.

The modest increase in core orders was a welcome sign of strength for the economy but the outlook for capital spending remained uncertain as companies take a hit on corporate earnings.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, grew 0.2% in August after a 6.3% rise in July.

The rise was bigger than a 1.0% contraction seen by economists in a Reuters poll.

But orders from manufacturers shed 0.6%, while those from non-manufacturers lost 6.9%, the Cabinet Office data showed on Monday.

The government raised its assessment on machinery orders to say they had stopped falling.

Overseas orders, which are not included in core orders, saw their sharpest rise since April 2014, jumping 49.6% from the previous month after posting a 13.8% gain in July.

The world's third-largest economy is gradually recovering from the shock of the coronavirus pandemic, with the government last Wednesday saying economic activity likely stopped contracting in August.

That offered some relief for new Prime Minister Yoshihide Suga, who has pledged to revive Japan's battered economy.

The government has already deployed a combined $2.2 trillion of fiscal stimulus packages to overcome the pandemic's blow, adding to an enhanced programme from the Bank of Japan.

The central bank will hold two more policy reviews this year, with the first one set for Oct. 28-29 and the other one coming up in mid-December.

From a year earlier, core machinery orders, which exclude those for ships and electricity shed 15.2% in August, in line with an expected 15.6% decline.

(Reporting by Daniel Leussink; Editing by Sam Holmes)

((daniel.leussink@thomsonreuters.com; Twitter: @danielleussink; +81-3-4563-2747;))

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