Yet Tuesday’s data painted a brighter picture of the recovery as companies gear up for investments to maintain or even expand operations. Machinery orders are a leading indicator of capital investment.
The figures confirmed that Japan’s capital expenditures “continue to recover at a moderate pace,” said Norio Miyagawa, a senior economist at Mizuho Securities Research & Consulting. The government upgraded its assessment of the indicator, saying machinery orders are gradually picking up. Orders for semiconductor-making equipment, train cars, and computers in particular were strong.
Mr. Miyagawa said the forecast might be overly conservative, but other economists said it is a sign that a recovery in capital spending may still lack momentum. “If you look at the July-September figure, (machinery orders) are rising gradually.
Especially for manufacturers, there is uncertainty about demand overseas, and so they are still relatively hesitant,” said Mitsubishi UFJ Morgan Stanley Securities strategist Shuji Tonouchi. “It’s highly likely that capital expenditures will pick up gradually for the time being.” That could put more pressure on the government to prop up capital outlays, worth about 15% of economic output.
Economy Minister Akira Amari said Monday that the government needed to encourage capital expenditures as company spending was weaker than that by consumers. He also said the government should work on steps to bolster business investment in the autumn.
Takeshi Minami, chief economist at Norinchukin Research Institute, said it wasn’t yet clear if companies would be able to overcome the chill in demand after the sales-tax increase, and the government would have to pave the way by also cutting the corporate tax significantly.
(Eleanor Warnock for The Wall Street Journal)