Japanese machinery orders decline in October

There was further bad news for the world’s second largest economy today after it was revealed that Japanese core machinery orders (a highly volatile series seen as an indicator of corporate spending) fell more than expected in October.

Official figures revealed Japanese machinery orders fell by 4.5% in October compared with the previous month, analysts had expected a fall of 4.3%.

The figures come just a day after the Cabinet Office revealed that the Japanese economy grew at a far slower rate in the third quarter than previous estimates showed.

According to official figures, the Japanese economy grew by 0.3% between the July and September period, rather than the 1.2% previously reported and slightly less than the 0.7% analysts had expected.

The main reason for the downward revision was due to a fall in capital investment by companies as a result of a strong yen.

Meanwhile, earlier this week, the Government agreed to inject a further 7.2 trillion yen ($81 billion; £48 billion) into the economy to prevent it falling back into recession.

There have been fears that the return of deflation could stall growth within the economy.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s in which the economy struggled with falling prices.

The yen’s recent surge to a 14-year high against the US dollar poses a threat to the recovery by making Japanese exports more expensive in the US.

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