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Japan's Dec machinery orders cast doubt on strength of capex
[TOKYO] Japan's core machinery orders tumbled in December and companies expect orders to rise only marginally in January-March, raising concerns that recent gains in capital expenditure will start to peter out.
The 11.9 per cent decline in core orders in December was more than the median estimate of a 2.3 per cent fall and follows a 5.7 per cent increase in November.
The machinery orders come a day after gross domestic product data for October-December showed capital expenditure had risen for five consecutive quarters and suggest this run of gains may not continue.
Companies surveyed by the Cabinet Office forecast that core orders, which exclude those for ships and from electric power utilities, said they expect orders to rise only 0.6 per cent in January-March after a 0.1 per cent decrease in October-December.
Orders from manufacturers tumbled 13.3 per cent month-on-month in December, after a 0.2 per cent decline in the previous month because of reduced orders from makers of metals and manufacturing equipment.
Non-manufacturers' orders fell 7.3 per cent, following a 9.8 per cent gain in November due to declines in orders from retailers and wholesalers.
For January-March, manufacturers expect their orders to fall 5.7 per cent, while non-manufacturers expect their orders to rise 7.4 per cent.
Since taking office in late 2012, Japanese Prime Minister Shinzo Abe has used tax breaks and other incentives to encourage more domestic capital investment.
Companies were slow to respond, at first, but in recent years several indicators have shown consistent gains in capital expenditure.
Some companies are also spending on technology to deal with chronic labour shortages caused by Japan's shrinking and rapidly ageing population.