Japanese Machinery Orders Signal Investment to Aid Rebound

Japan’s machinery orders rebounded in January, signaling that company investment will help to drive a return to growth in the world’s third-biggest economy.

Bookings (JNMOCHNG), an indicator of future capital spending, rose 3.4 percent from a month earlier, the Cabinet Office said in Tokyo today. The median estimate of 30 economists surveyed by Bloomberg News was for a 2.3 percent increase. In December, orders fell 7.1 percent.

The Nikkei 225 Stock Average exceeded 10,000 for the first time in seven months on March 9 as Greece secured a rescue package, boosting prospects for European demand for Japanese exports. A weakening of the yen since the start of February will aid exporters such as Panasonic Corp. (6752) and Sony Corp. (6758) and the economy is set for a boost from reconstruction work after the earthquake a year ago.

“Global manufacturing activity is gaining momentum, and that’s positive for capital investment in Japan,” said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo. “We’re also seeing signs of improved overseas demand, particularly from Asia and the U.S., so that’s also good news.”

The Nikkei rose 0.4 percent after the report, with machinery makers including Fanuc Corp. (6954) and Tokyo Electron Ltd. (8035) among companies posting the largest advances. The yen traded at 82.25 per dollar at 9:50 a.m. in Tokyo. It has retreated more than 7 percent since touching a postwar high of 75.35 in October.

‘Revitalize’

“Japanese corporations will revitalize their attitude to investment” when the global economy is seen to be recovering, Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo and a former central bank official, said before the report. “If the currency does not appreciate further, that will support corporate sentiment and spending.”

Retail sales and industrial production exceeded economists’ estimates in January and a bigger-than-anticipated gain in capital expenditure drove a revision of fourth-quarter gross domestic product last week to show a 0.7 percent contraction, rather than the 2.3 percent decline initially reported.

JPMorgan forecasts the economy will expand 1.7 percent in 2012, with Nomura Securities predicting a 0.9 percent gain.

The Bank of Japan is meeting today and tomorrow to decide whether more stimulus is needed after unexpectedly boosting an asset-purchase program last month, a move that helped to weaken the yen. Signs of progress in taming Europe’s debt crisis have also reined in the currency, which is viewed as a haven for investors and reached a post-World War II record of 75.35 per dollar in October.

To contact the reporter on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net

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

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