Last Updated on June 10, 2020, 3:56 AM AST by Anthony Morris
Japan’s machinery orders have slumped in April at the quickest pace in around two years, as a decline in the demand and company profits because of the global coronavirus pandemic has paralysed the businesses spending.
Separate data has shown that the May wholesale prices had fallen at the fastest annual pace in around four years, keeping the market fears alive that Japan might slide back into deflation.
The weak readings would pressure the policymakers to take a bolder action to support an economy already headed for a deeper recession which is caused by the COVID-19 pandemic.
Core machinery orders, which are often regarded as an indicator the of capital spending in the next six to nine months, tumbled 12.0% in April from the previous month, Cabinet Office data showed on Wednesday.
The drop was more significant than an 8.6% decline seen by economists in a Reuters poll and the fastest fall after September 2018.
A senior economist at Mitsubishi UFJ Morgan Stanley Securities, Hiroshi Miyazaki said that it is hard to expect improvements in the overall machinery orders unless the overseas economic conditions recover and the Japanese exporters boost investment domestically.
The world’s third-largest economy had fallen into recession in the last quarter. However, firmer capital expenditure remained one of the few bright spots as demand for machinery and big-ticket items held up.
The fall in machinery orders during April suggests that the resilience in the business investment is now also giving way, a sign that the recession is likely to deepen in the present quarter.
Overseas orders have dropped by 21.6% from the previous month for their biggest fall since April 2019, highlighting the growing concerns regarding the external environment.
Miyazaki said that moves to limit capital investment, including machinery orders continued, because of a deterioration of profits.
The soft machinery orders data which came after separate, preliminary data that came out on Tuesday shows that Japan’s machine tool orders fell by 52.8% in May from a year earlier.
The government and the central bank have both taken steps to cushion the blow to the economy from the pandemic, with the Bank of Japan easing the monetary policy for two straight months in April.
Anthony Morris covers stories related to politics and regional developments. His in-depth reporting about governance and reforms makes him stand out in regional journalism, with a deep analysis of political trends and their impact on Caribbean communities.
