Japanese Machinery Orders Hit Record Low

Core machinery orders, an indicator of corporate capital spending, tumbled 11.3 percent in November, widely missing forecasts for a 1.1 percent increase.

TOKYO (AP) -- Japanese machinery orders, a closely watched indicator of corporate capital spending, slumped to a record low in November as anemic domestic demand kept companies cautious.

Core machinery orders tumbled 11.3 percent in November from a month earlier to 625.3 billion yen ($6.8 billion), the government said Thursday. The figure, which excludes often volatile numbers from shipbuilders and electric power companies, was the lowest since the government began releasing comparable data in April 1987.

Thursday's figure widely missed Kyodo News agency's average market forecast of a 1.1 percent rise and marked the second monthly decline. In October, orders were down 4.5 percent.

The results suggest that Japanese companies are handling an uptick in export demand without buying new equipment, delaying major capital spending until the domestic economy strengthens. Japan emerged from recession earlier this year, but its recovery is being undermined by deflation, falling wages and a still-weak jobs market.

"A full-scale recovery in capex (capital expenditure) remains heavily dependent on export industries due to the weakness of domestic demand," said Yuriko Tanaka, an economist at Goldman Sachs in Tokyo. "Low levels of capacity utilization suggest that capex will not revive very much in 2010 from its 2009 depression."

In downgrading its overall assessment of machinery orders, the Cabinet Office said that pace of declines is "moderating, but some developing weakness can be seen."

Core orders from manufacturers retreated 18.2 percent, while those from non-manufacturers fell 10.6 percent. Overseas orders declined 7.3 percent.

Overall orders received by 280 Japanese manufacturers fell 8 percent.

The Cabinet Office still predicts that in the October-December quarter, orders will increase 1.0 percent from the previous quarter.

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