Machine orders in Japan rebound as a sign of recovery in investment

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TOKYO: Japan’s basic machinery orders rose in July after falling the previous month, a sign that business spending is improving despite the economy’s wider hit from the pandemic.

However, the weaker-than-expected rebound could add to concerns over the already weak recovery in Japan, which has relied heavily on manufacturers and other export-oriented companies as the brakes hold back domestic consumption.

Orders for basic machinery, a highly volatile data series seen as a leading indicator of capital spending over the next six to nine months, rose 0.9% in July from the previous month, down 0.9% from the previous month. 3.1% gain noted by economists in a Reuters poll.

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It followed a 1.5% drop the month before.

Japan’s economy is at risk of falling back into contraction in the current quarter as the COVID-19 pandemic hits private consumption and manufacturing.

Adding to worries about the outlook, manufacturers’ moods fell to their lowest level in five months in September, showed Reuters Tankan, which closely follows the central bank’s main investigation into the tankan, in the midst of the pandemic and a global shortage of chips.

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The data set comes as the leadership race of the ruling party intensifies. The winner of the Liberal Democratic Party leadership race on September 29 is set to become prime minister and will need to set a growth strategy to get cautious Japanese companies to spend their huge piles of money https://jp.reuters.com / article / japan-economy-capex / update-1-japans-capex-rises-for-first-time-since-covid-19-outbreak-idUSL4N2Q21KZ.

By industry, manufacturer orders rose 6.7% month-on-month in July, marking a fourth consecutive month of increases, while service sector orders fell 9.5%. Industries such as electrical machinery dominated manufacturers, but construction, wholesale and retail industries weighed on service sector orders.

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Outside orders, which are not counted as base orders, rose 24.1%, rebounding from a 10% decline in the previous month.

On a year-over-year basis, base orders, which exclude those of ships and electric utilities, rose 11.1% in July, below a 15.7% jump expected by economists, according to the data.

The Cabinet Office maintained its assessment of machine orders, describing them as showing signs of “recovery”.

(Reporting by Kantaro Komiya and Tetsushi Kajimoto; Editing by Sam Holmes)

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