Japan’s Machinery Orders Performed Better in February

The Japanese core machinery climbed higher unexpectedly for the month of February, for a second consecutive month due to higher demand from manufacturers. This is a good sign of corporate investment that props up economic growth.

Another data reflects the wholesale prices increased at a slower pace in February. Generally showing that the economy is doing well and the economy is progressing but it is still not sufficient the induce inflation the Bank of Japan, though they need to overcome the deflationary tendency of the country.

The core orders rose by 2.1 percent which is a highly volatile data that gives off a positive indicator of capital spending in the next six to nine months. This gives off a pessimistic median estimate with 2.5 percent drop forecast based on the survey of economists by Reuters.

The survey last week on the Bank of Japan’s Tankan sentiment survey showed that mid-sized manufacturers intend to improve capital expenditures in the new fiscal year beginning on April 1. At the same time, this suggests that business investment would still be positive.

However, there are concerns about U.S. trade protectionism and potential gains of the Japanese yen against the U.S. dollar the gives risk on capital expenditure of Japan.

A senior economist at Mizuho Research Institute, Yusuke Ishikawa, says that the forecast on capital expenditures would still in an expansion phase supported by the manufacturing sector.

On the other hand, “uncertainty” caused by the U.S. trade policy could also affect investments in Japanese corporate to reduce. Although, this is not yet happening. Capex will persist to have an effect on Japan’s growth.

Orders from manufacturers increased by 8.0 percent in February after a 9.9 percent rise last month because of more demand from producers of steel and chemicals.

Meanwhile, the orders from Non-manufacturers remains the same for the month of February as gains in orders counters the decline in telecommunications sector from the real estate, shipping, and finance industries. Statistically, non-manufacturers’ orders increased by 4.4 percent.

The outlook is muddled by the raising concerns in the trade war between the United States and China. Each nation is threatening the other for a large tariff in the background of U.S. detesting on  China’s trade practices and approach on a foreign intellectual property.