Japan Machinery Orders Slide 3.3% as Economy Risks Shrinking

Japan’s machinery orders fell more than expected in August, a sign that companies will cut back spending as global demand slows.

Orders, an indicator of capital spending in three to six months, declined 3.3 percent after rising 4.6 percent in July, the Cabinet Office said today in Tokyo. The median of 26 estimates in a Bloomberg News survey was for a 2.3 percent drop.

Today’s data follow government reports last month showing declines in industrial output and exports, underscoring the risk of a contraction in gross domestic product. In an interview in Tokyo, Japanese Prime Minister Yoshihiko Noda yesterday called for talks to contain economic damage from a dispute with China over East China Sea islands.

“There’s a growing number of people who are pessimistic about the economic outlook,” Jun Kawakami, an economist at Mizuho Securities Co. in Tokyo, said before the report. “It’s really hard to see any signs that companies will increase capital spending.”

Japanese shares fell, with the Nikkei 225 Stock Average headed for an 11-week low, on the machinery order data and a cut to Spain’s debt rating by Standard & Poor’s.

The Nikkei 225 Stock Average dropped 0.6 percent to 8,547.99 as of 9:20 a.m. in Tokyo, its lowest since July 26. The broader Topix Index slid 0.5 percent to 713.54, with more than two stocks falling for each that rose.

Contraction Threat

JPMorgan Chase & Co. said in a report last week that the dispute with China may knock 0.8 percentage point off Japan’s gross domestic product in the October-December period and hasten a slide in the current account. The brokerage joins Morgan Stanley and Bank of America Merrill Lynch in predicting Japan’s economy will shrink for two consecutive quarters through the end of December.

The Bank of Japan (8301) today released minutes of a meeting last month where policy makers unexpectedly expanded monetary easing. During the discussions, one member advocated increasing the size of the central bank’s purchases of “risk assets,” the record showed. One said that the nation faces stagnant gross domestic product or very limited growth for the time being.

To contact the reporter on this story: 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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