Japan April Machine Orders Rebound on Solid Computer Demand from Service Providers; Orders from Manufacturers Down for 2nd Month in A Row

–Cabinet Office Keeps View: Machine Orders Pausing

By Max Sato

(MaceNews) – Japanese machinery orders, the key leading indicator of business investment in equipment, rebounded in April after two months of decline, led by solid demand from the non-manufacturing sector as Japan is playing catchup in easing Covid restrictions and reopening the economy, data released Thursday by the Cabinet Office showed.

For fiscal 2023 that began in April, capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control. 

The key points from machinery orders data:

* Core private-sector machinery orders, which exclude volatile orders from electric utilities and for ships, rose 5.5% from the previous month on a seasonally adjusted basis to ¥900.0 billion in April for the first rise in three months after posting an unexpected 3.9% fall to ¥852.9 billion in March, slipping 4.5% to ¥888.0 billion in February and surging 9.5% to ¥929.6 billion in January. It was firmer than the median economist forecast of a 3.0% rise (forecasts ranged from 1.4% to 4.8% gains). The amount in January was the largest since ¥948.8 billion in July 2022.  

* Machinery orders made a solid start to the second quarter. If core orders gained 3.4% in each of May and June, they would achieve the official forecast.  Last month, the Cabinet Office projected that core orders would rise a further 4.6% in the April-June quarter after a 2.6% rise in January-March, led by a sharp rise in orders from the non-manufacturing sector, as consumer spending on services is expected to remain solid without strict Covid public health rules.

* Orders from manufacturers fell 3.0% on the month in April after falling 2.4% in March and rising 10.2% in February while those from non-manufacturers in the core measure jumped 11.0% after dropping 4.5% in March and slumping 14.7% in February.

* The increase in core orders in April was led by solid demand for computers from the financial and insurance industries, transport and postal service companies as well as other non-manufacturing industries as the country moves toward digitization. In the manufacturing sector, there were declines in orders for computers from electric and industrial machinery makers.

* The Cabinet Office maintained its assessment after downgrading it in January for November data, saying, “Machinery orders are pausing.” The three-month moving average dipped 1.1% in the February-April period after increases of 0.2% in January-March and 1.6% in December-February. The latest moving average fell because January’s strong 9.5% gain dropped out of the equation, and thus it does not indicate a change in the recent trend, a Cabinet Office official told Mace News. 

* Core orders fell 5.9% from a year earlier in April after unexpectedly dipping 3.5% in March and surging 9.8% in February. It was above the median economist forecast of a 7.0% fall (forecasts ranged from an 8.7% drop to a 6.3% rise).