Japan core machinery orders surge in August

| October 12, 2011
”Japan

Japanese core private-sector machinery orders – a highly volatile series seen as an indicator of corporate spending – surged in August.

According to the Cabinet Office, orders grew 11% in August on a monthly basis – the strongest pace in a year – and also beating forecasts.

Orders have fallen over recent months due to the impact on production of the March earthquake and tsunami, which disrupted supply chains and led to power shortages.

In the wake of the twin disasters, industrial output suffered a record drop and spending plunged as consumer and business confidence took a battering.

As a result, the economy was pushed back into recession in the first quarter of the year as the catastrophes impacted on growth.

However, it appears the economy is steadily recovering after today’s encouraging figures.

Japan’s manufacturing sector is heavily dependent on exports to maintain its growth and the US and Europe are key markets for many of Japan’s largest companies.

However, both economies are coming under pressure as the euro zone battles with a sovereign debt crisis and rising unemployment in the US is hampering growth.

These factors, together with the strong yen, however, could still cause problems for Japan.

The Bank of Japan’s quarterly tankan survey released earlier this month revealed large manufacturers and non-manufacturers plan to increase capital spending by 3% in the current business year, lower than a 4.4% rise expected by economists.

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