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Japan's quarterly machinery orders drop sharply

(Agencies)
Updated: 2008-11-10 15:04

TOKYO -- Japan's core machinery orders, a key measurement of capital investment, dropped a record-tying 10.4 percent in the July-September quarter in the latest sign of a slowdown in Japan and the world, the Cabinet Office said Monday.

Nissan Motor's assembly plant in Karita, Japan. Japan's Nissan Motor Co. has said it was axing 3,500 jobs worldwide and cut its full-year forecasts by two-thirds as the global economic crisis shakes the auto industry. [Agencies]

Core private sector machinery orders fell to 2.88 trillion yen ($29 billion) in the quarter. The figure excludes often-volatile orders from electric power firms and shipbuilders.

The sharp decline from the previous quarter matched a 10.4 percent drop in the second quarter of 1998, the Cabinet Office said.

"The latest data showed eroding business confidence in the face of the worsening global economy," said Hiroshi Watanabe, economist at Daiwa Institute of Research.

"Companies are very pessimistic about the state of the global economy, and expect global demand to remain stagnant for a while. They will continue to cut business investment in the coming months due to sluggish global demand," Watanabe said.

Machinery orders from manufacturers sank 10.9 percent in the July-September quarter from the previous quarter, while those from non-manufacturers fell 12 percent.

Orders from the electronic sector fell 2.5 percent in the quarter, while those in the auto business edged up just 1.1 percent.

Economists were skeptical of the Cabinet Office's projection that core machinery orders would grow 1.2 percent in the fourth quarter.

"Global demand is slowing, and investment in key sectors, such as the auto and electronic device, will remain sluggish in the coming months. The government may have to revise down the October-December forecast soon," said Hideki Matsumura, senior economist at Japan Research Institute.

Daiwa's Watanabe also said he did not believe the government's projection.

"The global economy is getting worse right now. Some companies were even canceling machinery orders due to deteriorating global demand," he said.

In September alone, core machinery orders rose 5.5 percent from August, when they plunged 14.5 percent due to slumping demand amid deepening fears over a global recession. Economists had forecast a 4.9 percent gain.

That was the first month-on-month gain in four months, but Matsumura said the September growth was mainly due to a technical rebound from August.

"The growth in September was so feeble," said Matsumura. "Companies remained reluctant to invest due to a slowdown in the global economy."

Total machinery orders, including those from electric power firms and ships, fell 3.0 percent in September, the report showed.