Japan Machine Orders Gain, Backing BOJ Pause on Adding Stimulus
Japan Machinery Orders Rise for Second Month in July
Haruyoshi Yamaguchi/Bloomberg
About half of Japan’s manufacturers say the recent strengthening of the yen is hurting their sales, a survey by Teikoku Data Ltd. released last week showed.
About half of Japan’s manufacturers say the recent strengthening of the yen is hurting their sales, a survey by Teikoku Data Ltd. released last week showed. Photographer: Haruyoshi Yamaguchi/Bloomberg
Japanese machinery orders rose for a second month in July as overseas demand encouraged investment by companies.
Orders, an indicator of business investment in three to six months, rose 8.8 percent from June, when they increased 1.6 percent, the Cabinet Office said today in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was for a 2 percent gain.
The growth in corporate outlays spurred by growing profits and sales may come under threat by the yen’s advance to a 15- year high against the dollar. Bank of Japan Governor Masaaki Shirakawa said yesterday he is “well aware” that the currency is affecting exports and signaled policy makers are ready to implement further stimulus if needed.
“Capital spending is gradually recovering on the back of improvements in corporate profits,” Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo, said before the report. “But the recovery pace in business investment remains dull, lacking enough power to become the driving force of the economy.”
About half of Japan’s manufacturers say the recent strengthening of the yen is hurting their sales, a survey by Teikoku Data Ltd. released last week showed. Some 47.4 percent of manufacturers and 36.7 percent of all companies are seeing lower sales because of currency movements, the report said.
‘Increasing Risk’
“We see an increasing risk of firms becoming more cautious about new investment because of uncertainties about global demand, as well as due to adverse impacts from yen appreciation and stagnant stock prices,” said Takehiro Sato, Japan economist at Morgan Stanley MUFG Securities Co. in Tokyo.
Sony Corp. Chief Executive Officer Howard Stringer said last week that the currency’s appreciation is a “huge handicap for us.” The Bank of Japan last week bolstered a credit program and Prime Minister Naoto Kan pledged fresh stimulus to help protect the economy.
A stronger yen makes Japan’s exported goods more expensive for foreign buyers, which is prompting some manufacturers to move production abroad to reduce currency risk.
Nissan Motor Co., Japan’s third-largest automaker, began selling a Thai-made March compact car in July to counter the rising yen. Panasonic Corp., the maker of Viera televisions, said Aug. 20 it will move part of its plasma display panel production to Shanghai.
Economists predicted that the government will likely revise up its estimate of the second-quarter economic growth on Sept. 10, after a report last week showed that companies cut spending at the slowest pace since 2007.
Gross domestic product expanded 1.5 percent on an annualized basis last quarter, compared with a preliminary reading of 0.4 percent, according to the median forecast of 20 economists surveyed by Bloomberg News.
Companies’ sales rose 20.3 percent in the second quarter, the biggest increase since 1980, a finance ministry report showed last week. Profits climbed 83.4 percent, moderating from a record 163.8 percent gain in the first quarter.
To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
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