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
Japan’s machinery orders and current account surplus exceeded forecasts in July even as the yen appreciated, supporting the central bank’s decision to hold off from further monetary easing yesterday.
Orders rose 8.8 percent from June, the biggest gain this year, the Cabinet Office said in Tokyo today. July’s current- account surplus widened 26 percent from a year earlier to 1.676 trillion yen ($20 billion), a separate report showed.
The yen’s advance to a 15-year high and slowing overseas expansions are increasing concern that Japan’s export-led recovery will come to a halt. The Bank of Japan yesterday kept liquidity injections unchanged after boosting them at an Aug. 30 emergency meeting, while signaling a readiness to implement further stimulus if needed. Governor Masaaki Shirakawa said today he’s “well aware” the yen may hurt business sentiment.
“The impact of the yen’s gain will materialize in coming months, although today’s reports haven’t shown it yet,” said Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA. “The BOJ may make an additional move, should such an impact become more obvious.”
The yen rose to 83.71 per dollar as of 11:01 a.m. in Tokyo from 83.83 yesterday in New York, when it advanced to 83.52, the strongest level since June 1995. Stocks dropped even after today’s economic figures, with the Nikkei 225 Stock Average losing 2 percent to 9,044.39.
Recovery Intact
Japan’s latest economic indicators suggest the strengthening yen isn’t chilling corporate sentiment yet.
The 8.8 percent increase in July machinery orders, an indicator of investment in three to six months, exceeding the 2 percent gain median forecast of 25 economists surveyed by Bloomberg News. The current-account surplus surpassed a median forecast of 1.535 trillion yen.
Japanese Cabinet Office Parliamentary Secretary Keisuke Tsumura said he can’t rule out the possibility that the rising yen will hurt machinery orders in the months ahead.
“I have a very strong sense of crisis on the yen’s gain as a downside risk to the economy,” Tsumura told reporters at a briefing in Tokyo today. “We’ll make an effort to wipe out downside risks by using all tools available.”
Finance Minister Yoshihiko Noda told lawmakers at a parliamentary hearing that currency intervention is one of those tools and that the government is very concerned about the exchange rate. Japan hasn’t sold yen in the foreign-exchange market since 2004.
Hit to Sales
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.
Nomura Holdings Inc. has cut its 2011 forecasts for sales growth and recurring profit for Japanese companies because of the stronger yen.
Nomura’s forecast for year-on-year sales growth of 353 companies excluding financials in the Nomura 400 stock index is 4 percent, down from its June estimate of 4.4 percent. The brokerage also lowered its outlook for profit growth to 19.8 percent, down from 21.2 percent before.
A stronger yen makes Japan’s exported goods more costly for foreign buyers, which is prompting some manufacturers to move production abroad to reduce currency risk.
Nissan, Panasonic
Nissan Motor Co., Japan’s third-largest automaker, began selling a Thai-made 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.
Even so, a report last week showed that companies cut spending at the slowest pace since 2007, an improvement that prompted economists to predicted the government will revise up its estimate of the second-quarter economic growth on Sept. 10.
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.
The Cabinet Office maintained its assessment on machinery orders for a fourth month, saying that they are showing signs of “picking up.” From a year earlier, orders rose 15.9 percent.
To contact the reporters on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net; Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
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