Japan’s Machinery Orders Increase

By Kantaro Komiya

TOKYO (Reuters) – Japan’s core machinery orders rose 3.4% in November from the previous month, exceeding analysts’ forecasts, according to government data released on Monday. This increase indicates a potential recovery in capital expenditure ahead of a central bank interest rate review later this week.

This reading surpasses the 0.4% decline predicted in a Reuters poll and marks the second consecutive month of growth. Orders from manufacturers surged 6.0%, while those from ‘core’ non-manufacturers, excluding the shipbuilding and electricity sectors, saw a rise of 1.2%.

Masato Koike, a senior economist at Sompo Institute Plus, noted, “Demand for capital investment in response to labor shortages and digitalization remains strong.”

Despite improved business sentiment among manufacturers over the past month, uncertainties loom, especially with the impending U.S. Trump presidency, as highlighted by the Reuters Tankan survey last week.

Koike mentioned that the effect of a central bank rate hike on capital investment appears to be “minor at the moment.”

It is anticipated that the Bank of Japan will increase interest rates during its Jan. 23-24 policy meeting, provided there are no market disturbances after Donald Trump assumes office, sources told Reuters.

On a year-on-year basis, core machinery orders, known for their volatility, increased 10.3%, outperforming the forecasted 5.6% growth, according to Monday’s data. The Cabinet Office has upgraded its assessment of machinery orders, indicating signs of improvement.