Japan May machinery orders seen lower but recovery trend intact

[TOKYO] Japan's machinery orders were expected to fall in May after April's huge gains, a Reuters poll showed on Friday, with analysts on the lookout for signs of US-China trade frictions impacting on machinery sales.

US tariffs on US$34 billion in Chinese imports took effect on Friday with Beijing having vowed to respond immediately, potentially putting the world's two biggest economies on a risky path towards a full-scale trade war.

Core machinery orders, a volatile data series regarded as an indicator of capital spending in the coming six to nine months, were seen down 5.5 per cent in May following a 10.1 per cent jump in April, the poll of 17 analysts showed.

From a year earlier, core machinery orders, which exclude those for ships and from electric power utilities, likely rose 8.6 per cent in May after rising 9.6 per cent in April.

"Firms' willingness to undertake capital spending is solid, especially investment in streamlining and labour saving. So we expect machinery orders will grow moderately," said Yosuke Yasui, senior economist at Japan Research Institute.

The Cabinet Office will issue the machinery orders data at 8.50am Japan time on July 11 (2350 GMT July 10).

Solid capital spending plans were a bright spot in last week's downbeat Bank of Japan business confidence survey, which showed big manufacturers' sentiment worsened for a second straight quarter in the three months to June. The Reuters poll showed Japan was expected to post a current account surplus of 1.24 trillion yen (S$15.30 billion) in May, down from a 1.845 trillion yen surplus in April, thanks to a trade deficit and reduced gains in income from overseas investments.

The finance ministry will announce the current account data at 8.50am July 9 Japan time. (2350 GMT July 8 )

The Bank of Japan's corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services, was expected to rise 2.8 per cent in June from 2.7 per cent in May.

Higher prices for electricity, coal and oil products and city gas were seen boosting the CGPI, which is due on July 11.

REUTERS