Japan's closely watched machinery orders fell for the first time in five years in 2007, official data showed Friday, sparking fears that a US slowdown may pull Asia's largest economy down.
The data raised renewed concern about Japan's economic recovery, which has been based on exports, and contributed to a 1.44 per cent fall on the Tokyo Stock Exchange despite a positive lead from Wall Street.
The private sector's core machinery orders, which exclude particularly volatile demand from power companies and for ships, fell 4.0 per cent in 2007 from the previous year, with orders in December alone tumbling 3.2 per cent.
The machinery orders are closely watched by policymakers and markets as a leading indicator of corporate capital spending.
The December fall was significantly steeper than a drop of 0.8 per cent expected by the market and marked the second straight month of decline after a 2.8 per cent drop in November.
Despite the sustained downturn for the last two months of 2007, the Cabinet Office stuck to its assessment of a flat trend in machinery orders -- the eighth straight month that it has made the same view.
Economy and fiscal policy minister Hiroko Ota said there was "no need to be so pessimistic," noting orders were likely to rise in the January-March quarter.
The Cabinet Office said machinery orders are forecast to rise 3.5 per cent for the January-March term from the previous quarter, following an overall 0.9 per cent rise in the October-December period.
But the minister admitted she needed to watch economic developments closely.
"As the US economy is showing signs of a slowdown, we need to be cautious on whether the January-March forecast can be achieved," she told reporters.
Private-sector economists snubbed the government projection.
"Who would believe the projection, which has not been trustworthy?" said Toshio Sumitani, an economist at the Tokai Tokyo Research Center.
"The Japanese economy is slowing down as the US economy has put one of its two legs into recession," he said, noting that foreign orders from Japan fell 4.9 per cent from November.
Naoki Murakami, senior economist at Goldman Sachs, said foreign orders were very volatile but their latest fall "matches a slowdown in Japan's exports since November 2007 in trade data."
"A slowdown in exports, which had led Japan's economy for the past five years, is now inevitable," he said.
However, Shinichiro Kobayashi, senior economist at Mitsubishi UFJ Research and Consulting, said the small rise in October-December showed that the US economic slowdown had been offset by strong growth in emerging countries.
"But there is a possibility that overall external demand may slow in the January-March period," he said.
"And corporations may reduce their capital expenditure or postpone their capital spending plans from April depending on how the global economy will be," he said.
December orders placed by the manufacturing sector fell 7.8 per cent on lower demand from such sectors as steel and other metals and precision machinery.
Orders for semiconductor chip-making tools fell 17.5 per cent in December from November, as global chip makers are curtailing fresh capital investment due to tumbling prices.
Orders placed by non-manufacturers dropped 5.2 per cent from the previous month and were down 3.5 per cent from a year earlier, hit by lower orders from the telecom sector.
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AFP
Renewed concern about Japan's economic recovery
FE Team | Published: February 16, 2008 00:00:00 | Updated: February 01, 2018 00:00:00
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