Fri, Jul 09, 2010 - Page 11 News List

Japanese machinery orders slide


Japanese machinery orders tumbled by the most in almost two years in May as companies grew more cautious about the business outlook due to a rising yen and signs of a global economic slowdown.

Bank lending also fell last month, matching the biggest annual decline in almost five years, as demand from companies for funds to invest in plants and equipment remained sluggish.

Bank of Japan Governor Masaaki Shirakawa stuck to the central bank’s view that Japan’s economy was showing further signs of a moderate recovery, but he and other market watchers voiced concerns about the potential fallout from Europe’s debt woes.

A senior government official said there was a risk Japan’s economy may enter a lull, after service sector sentiment worsened for two straight months last month.

“Europe’s financial problems haven’t had an impact yet, but companies are applying the brakes now,” said Tetsuro Sawano, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

Core private-sector machinery orders, a highly volatile series regarded as an indicator of capital spending, fell 9.1 percent in May, the biggest decline since August 2008 and far more than the median market forecast for a 3.1 percent decline. Worries about Europe’s debt problems and the health of the global recovery have helped push the yen up more than 5 percent against the US dollar this year as investors shun riskier assets, which could hurt business sentiment, economists say.

The US dollar stood around ¥88.30 yesterday, edging off a seven-month low of ¥86.96 hit at the start of the month.

Machinery orders from manufacturers fell 13.5 percent in May, faster than a 5.5 percent decline the previous month.

Keisuke Tsumura, parliamentary secretary of the Cabinet Office, said the recovery in capital spending could be slower than anticipated.

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