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Japan Machinery Orders Fall 13% in Sign of Limits on Investment

Japan Machinery Orders Fall 13% in Sign of Limits on Investment
A chemical plant stands in an industrial area of Kawasaki City, Kanagawa Prefecture, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

Japan’s machinery orders plunged 13 percent in January, the biggest decline in eight months, signaling limits on corporate investment as Prime Minister Shinzo Abe tries to drive an economic revival.

The decline from the previous month, announced by the Cabinet Office today in Tokyo, compared with the median estimate in a Bloomberg News survey of 26 economists for a 1.7 percent fall. Large orders can cause volatile results.

Japan returned to growth in the fourth quarter as the yen began to slide, bolstering Abe’s campaign to end 15 years of deflation and revive the world’s third-biggest economy. Today’s data are a reminder that business investment will not drive the recovery, said Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong.

“Looking ahead, we expect accelerating consumption, residential and public investment,” Devalier said. “But given that exports are trending at still-weak levels, it will take more time before we see the improved business environment spurred by the weak yen and increased manufacturer optimism translate into robust corporate investment.”

The Japanese currency was little changed at 96.03 per dollar as of 9:33 a.m. in Tokyo.

Devalier cautioned against reading too much into a single month of “very volatile” data.

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