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Japan's machinery orders tick up, signals resilience in capital spending

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Japan's machinery orders unexpectedly rose in May, offering policymakers some comfort capital expenditure has held up despite the hit to corporate profits from the coronavirus pandemic.

[TOKYO] Japan's machinery orders unexpectedly rose in May, offering policymakers some comfort capital expenditure has held up despite the hit to corporate profits from the coronavirus pandemic.

Core orders, a highly volatile data series regarded as an indicator of capital spending, rose 1.7 per cent in May after a 12.0 per cent slump in April, the fastest drop since 2018.

The increase confounded a 5.4 per cent drop projected by analysts.

A 15.5 per cent drop in manufacturers' orders was offset by a 17.7 per cent increase in orders by non-manufacturers, the Cabinet Office data showed on Thursday.

The Cabinet Office maintained its assessment on machinery orders to say they were hovering on a weak note.

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Overseas orders declined 18.5 per cent from the previous month, highlighting growing concerns about external demand.

Japan fell into recession in the first quarter, although firmer capital expenditure was backed by demand for automation and high-tech investment to offset a labour shortage in the fast-ageing population.

The Bank of Japan's quarterly tankan survey showed on July 1 big firms expected to increase capital expenditure by 3.2 per cent in the year to March 2021, seen relatively resilient but below the plans seen three months ago.

The BOJ will scrutinise the tankan results and other key indicators including core orders at its next policy review on July 14-15, although it is widely expected to stand pat on policy for the time being.

The government has rolled out a combined US$2.2 trillion of fiscal stimulus packages to fight the pandemic and the central bank eased monetary policy for two straight months in April.

REUTERS

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