Orders for machinery rebound in Japan

By Tomoko A. Hosaka  |   2008-6-11  |     NEWSPAPER EDITION

JAPANESE machinery orders - a key barometer of capital spending - rebounded in April after falling for two straight months, but the boost did little to alleviate concerns over the outlook for the world's second-largest economy.

Core machinery orders, which exclude often volatile orders from electric power firms and those for ships, rose 5.5 percent in April from the previous month, the government said yesterday.

That's after an 8.3-percent drop in March and a 12.3-percent plunge in February.

Compared with a year earlier and without seasonal adjustments, core orders rose 0.5 percent in April, the data from the Cabinet Office showed.

The indicator is considered an important gauge of business investment in the coming months, providing a window into corporate sentiment amid global economic uncertainties and weakening profits.

The April bounce, while beating market hopes for a 3-percent increase, looks like a temporary bump than a reversal in the overall fall in machinery orders, economists said.

The Cabinet Office left unchanged its March assessment of the indicator, describing orders as "weakening."

One-time orders for power-generation machinery as well as railroad cars drove up April's numbers, said UBS economist Akira Maekawa.

Without those factors, he said, April core orders would have declined moderately from a year earlier instead of posting a slight gain.

"We are not in a situation where companies are aggressively making capital investments," Maekawa pointed out.

The machinery orders data came a day after the release of a business activity index, which the government said signaled a "possible turning point" in the country's economy.