Japan's Jan core machinery orders fall 2.0% m-o-m

[TOKYO] Japan's core machinery orders slipped for the first time in five months in January, a worrying sign for an economy already facing heightened pressure from the Ukraine war and high energy and raw material prices.

The decline in core orders hurts hopes that a pickup in business spending will support private demand in the world's third-largest economy as firms struggle with surging input prices, a chip shortage and supply disruptions.

Core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, contracted 2.0 per cent in January from December, posting their first drop in five months, the Cabinet Office data showed.

It was largely in line with economists' median estimate of a 2.2 per cent contraction and followed a 3.1 per cent jump in the previous month.

Japanese firms could delay spending plans due to higher commodity and transportation costs that are sending wholesale inflation soaring and squeezing corporate margins.

Compared with a year earlier, core orders, which exclude volatile numbers from shipping and electric power utilities, advanced 5.1 per cent in January, the data found.

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"The fall in machinery orders in January suggests that business investment may not recover much this quarter from a disappointing 2021," said Tom Learmouth, Japan economist at Capital Economics.

January core orders were 0.8 per cent their fourth-quarter average, Learmouth said. "That's consistent with a small rise in spending on machinery and transport equipment, which makes up around half of business investment," he wrote in a note.

By sector, orders from manufacturers lost 4.8 per cent month-on-month, while those from non-manufacturers saw a 1.9 per cent contraction.

The government kept its assessment on machinery orders unchanged, saying they were picking up.

After contracting in the third quarter of last year, Japan's economy returned to growth in October-December. But the rebound was smaller than initially estimated due to weaker growth in private consumption and capital expenditure.

Ruling coalition officials this week called for a fresh spending package to offset the economic blow from the Ukraine crisis, which is already hurting households and retailers by driving up energy and food costs. REUTERS