Japan machinery orders hit 5-year high
Japanese companies are gearing up for significant new investments in domestic factories, distribution networks and other infrastructure this year, government data suggested on Thursday, in a shift that would bolster the country’s Abenomics-driven expansion. Orders of new machinery by businesses, considered a leading indicator of overall capital investment, surged to a five-year high in November, rising 9.3 per cent to Y882.6bn. The year-on-year increase, which handily beat analysts’ expectations, was the second in two months and the fifth biggest on record. Business investment has been a missing element in Prime Minister Shinzo Abe’s year-old effort to stimulate the Japanese economy. Mr Abe has ramped up government spending while the Bank of Japan has massively loosened monetary policy, but private companies – possibly concerned that the state-driven surge in demand will be temporary – have been cautious about expanding their production capacity. Capital investment picked up slightly in the second quarter of last year and was flat in the third. Although the machinery orders number excludes the volatile shipping and electric power sectors, it is still prone to sizeable month-to-month fluctuations. Yet Marcel Thieliant, an analyst at Capital Economics, said Thursday’s data nonetheless "point to a renewed recovery in business investment". He noted that Japanese companies can easily fund such investment, thanks to deep cash reserves and ultra-low interest rates. In the services sector, in particular, companies have suppressed their spending for years but are now looking to upgrade ageing information technology and distribution systems. Capacity utilisation in the non-manufacturing sector is at the highest level since the early 1990s, according surveys by the BoJ.