Japan’s Machinery Orders Rebound More Than Expected (Update1)
By Jason Clenfield and Tatsuo Ito
Aug. 10 (Bloomberg) -- Japanese machinery orders rose more than economists estimated in June, the first gain in four months and the latest sign that the nation’s worst postwar recession is easing.
Bookings, an indicator of capital investment in the next three to six months, rose 9.7 percent from May, the Cabinet Office said today in Tokyo. The median estimate of 22 economists surveyed by Bloomberg was for a 2.6 percent increase.
The current-account surplus, the nation’s broadest measure of trade, widened for the first time since February 2008 as exports improved, a separate report showed. Economists say the rebound in demand is unlikely to be enough to prompt companies including Toyota Motor Corp. to increase spending on factories and equipment.
“The worst is definitely over in terms of earnings, but the incentive to invest is very limited in a world in which production levels are so low,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo.
The yen traded at 97.27 per dollar at 9:08 a.m. in Tokyo from 97.39 before the report was published. The Nikkei 225 Stock Average rose 1.5 percent.
The current-account surplus more than doubled to 1.153 trillion yen ($11.8 billion) in June from a year earlier, the Ministry of Finance said. Exports fell 37 percent from a year ago and imports slid 43.8 percent. Shipments climbed 6.3 percent from May.
Spending Cuts
A survey published last week by the Development Bank of Japan showed Japanese companies will cut capital spending 9.2 percent this fiscal year. Reductions by manufacturers will be the steepest since 1993.
Still, more than $2 trillion in spending by governments worldwide has stabilized global demand, supporting manufacturers such as Kubota Corp., which is selling more farming equipment in China. Japan’s factory production rose 8.3 percent last quarter, rebounding from a record 22.1 percent plunge in the previous period.
Profit estimates for Japanese companies have been better than expected, helping lift the Nikkei 17 percent since July 13. Some 15 percent of firms listed on the first section of the Tokyo Stock Exchange have raised first-half earnings estimates since June, according to Tokyo-based Shinko Research, while 10 percent have lowered projections.
‘Improving Gradually’
“Earnings will probably keep improving gradually, but cash flows are very low,” said RBS’s Nishioka. “When companies are making the decision about whether to invest, what’s important isn’t how much sales or production are increasing, it’s the level that matters.”
Toyota last week narrowed its loss forecast for the current business year, citing government incentives introduced in Japan, the U.S. and Europe to encourage car-buying. Even with an improved outlook, the company estimates it will sell 3 million fewer cars than it has the capacity to build. The automaker plans to cut capital spending 36 percent this year.
Declining business spending, which made up 15 percent of gross domestic product last year, is one of the reasons Japan’s recovery is forecast to lose momentum later this year. The world’s second-largest economy probably grew last quarter for the first time in a year, expanding at an annualized 3.8 percent pace after a record 14.2 percent contraction in the first quarter, according to the median estimate of 20 analysts.
To contact the reporters on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net; Tatsuo Ito in Tokyo at tito@bloomberg.net.
Last Updated: August 9, 2009 20:15 EDT
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