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Japan's extended machinery orders fall bodes ill for business spending


JAPAN saw another decline in machinery orders in October in a fresh sign that business spending, one of the few points of strength in the world's third-largest economy, is stalling as slumping exports bruise investment appetite.

Core machinery orders fell 6.0 per cent in October from the previous month, down for a fourth straight month and dashing expectations for a 0.9 per cent increase in a Reuters poll, data showed on Thursday.

The decline marked the longest period of month-on-month contraction since a similar stretch to January 2009 and throws up a challenge for policymakers counting on solid business spending to support demand amid a global slowdown.

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"Companies are becoming increasingly cautious in regard to investment," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

"The impact from the sales tax hike seems to be larger than was expected," he added.

The core machinery orders data is a highly volatile series but regarded as a key indicator of capital spending in the coming six to nine months.

Capital expenditure has been a rare positive for the economy over the past two quarters as companies invest in new equipment and automation.

Japan's economy expanded at a faster pace than initially reported in the third quarter largely thanks to improvements in business spending as well as private consumption.

However, the drop in orders suggests that Japanese manufacturers are increasingly cautious about their spending amid weakening demand, due in large part to slowing growth in China and the damaging Sino-US trade war.  REUTERS