Japan Machine Orders Fall More Than Forecast in Sign Investment May Falter

Japan’s machinery orders fell more than forecast in September, indicating that companies may hold off on outlays on concern a global slowdown and a strong yen will hurt business.

Bookings, an indicator of future capital spending, fell 8.2 percent in September from August, the Cabinet Office said in Tokyo today. The median forecast of 29 economists surveyed by Bloomberg News was for a 7.1 percent fall. Orders rose 11 percent in August from July.

A yen trading near post-World War II highs against the dollar eroded profits at Japanese exporters from Sony Corp. to Toyota Motor Corp. last quarter. Industrial production dropped a sharper-than-expected 4 percent in September, in a sign demand for Japanese products may be faltering.

“September was probably a period of cooling,” and concerns about the global economy have lessened since then, said Naomi Fink, head of Japan strategy at Jefferies Japan Ltd. in Tokyo.

Japan’s currency traded at 77.79 per dollar as of 11:14 a.m. in Tokyo and the Nikkei 225 Stock Average fell 2.4 percent after a surge in Italy’s bond yields stoked concern that Europe’s debt crisis is spreading.

The yen’s appreciation to a postwar record of 75.35 yen on Oct. 31 prompted Japan to intervene in the currency market for the third time this year. Barclays Bank Plc and Totan Research Co. estimate that officials sold a record 8 trillion yen ($103 billion) in a single day, based on analysis of the Bank of Japan (8301)’s balance sheet.

‘Reaction’

The decrease in bookings is “a reaction to the positive result in orders in August,” Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo, said before the report. “If October and November figures are also negative we can confirm a negative trend.”

Growth in the world’s third-largest economy will probably slow after rebounding from nine months of contraction last quarter, due to the strong yen and weakening global demand, surveys showed.

Gross domestic product probably grew at an annualized 5.8 percent in the third quarter, according to the median forecast of 23 economists in a Bloomberg News survey ahead of the Cabinet Office release of the data on Nov. 14.

Japan’s economy may then expand 2.3 percent in the fourth quarter and 2.7 percent in the first, according to the average forecast of 42 economists compiled by the government-affiliated Economic Planning Association.

Toyota Profit

Toyota, Asia’s largest carmaker, this week reported that its profit fell 19 percent in the second quarter ended Sept. 30, as the Thai floods hampered its efforts to recover from the March 11 earthquake and the yen’s gains eroded operating profits.

Sony, Japan’s largest consumer-electronics exporter, reported last wee an unexpected loss of 27 billion yen for last quarter.

Prime Minister Yoshihiko Noda has submitted to parliament a 12.1 trillion yen third extra budget to pay for reconstruction after the March disaster. The government has already passed two packages worth a total of 6 trillion yen for disaster relief.

To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.