Japan Machinery Orders Unexpectedly Rise

Japan’s machinery orders exceeded all economists’ estimates in February, signaling gains in capital spending that may help to sustain a recovery in the world’s third-biggest economy.

Bookings (JNMOCHNG) increased 4.8 percent, the most since November, after rising 3.4 percent the previous month, a Cabinet Office report showed in Tokyo today. The median estimate of 28 economists surveyed by Bloomberg News was for a 0.8 percent decline.

Earthquake reconstruction may help the economy maintain momentum after a contraction in three of the past four years and as manufacturers forecast a strengthening yen that will limit exporters’ profits. The Bank of Japan yesterday held off from adding stimulus even as some lawmakers urge more aggressive easing to end deflation and spur growth.

“Today’s report points to a gradual recovery in capital spending,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “Japan’s economy should have returned to growth in the first quarter and the expansion may continue this quarter.”

The yen traded at 80.78 per dollar as of 12:31 p.m. in Tokyo. The Nikkei 225 Stock Average (NKY) fell 1 percent to 9,442.46 with Sony Corp. (6758) and Sharp Corp. (6753) falling after announcing record losses.

The government raised its evaluation of machinery orders today, describing them as “showing signs of gradually increasing.” Demand from chemical makers surged 53 percent because of a large-lot order, and bookings from shipbuilders also increased, the report showed.

Stronger Yen

The quarterly Tankan index of corporate sentiment released April 2 showed that executives expect the yen to strengthen to an average of 78.14 per dollar this fiscal year. The yen weakened around 4 percent since the central bank boosted its asset purchase program by 10 trillion yen ($123 billion) on February 14, although it strengthened since reaching a low on March 16.

“Domestic demand is providing a boost to growth in the first half, which will be joined by stronger export growth in the second half as the global recovery gains traction,” Matthew Circosta, an economist at Moody’s Analytics in Sydney, said before the report.

Capital spending rose 7.6 percent in the fourth quarter. Kyocera Corp. (6971), an electronic equipment maker, announced on April 10 that it would build a 25 billion yen solar plant in the southern prefecture of Kagoshima in cooperation with IHI Corp (7013) and Mizuho Corporate Bank. (8411)

Today’s figure excludes shipping and electrical power generation orders, which can be volatile.

To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Keiko Ujikane in Tokyo at kujikane@bloomberg.net

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

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