Japan’s May machinery orders seen rebounding modestly

By Kaori Kaneko

TOKYO (Reuters) – Japan’s machinery orders were expected to rebound only modestly in May, a Reuters poll found, as a strong yen and weak overseas demand clouded the outlook for capital investment.

Core machinery orders, a highly volatile data series regarded as a leading indicator of capital spending, were seen likely to grow 2.6 percent in May after falling 11.0 percent in April, the poll of 19 economists found.

Core orders, which exclude those of ships and electrical equipment, were expected to have fallen 8.7 percent in May from a year ago, after a 8.2 percent decline in April.

“Firms’ capital spending is expected to stay solid over the medium term due to the need to upgrade ageing facilities, special demand from the Tokyo Olympics, and inbound investment,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“But there are worrying factors such as growing risks to the economy in Japan and overseas, and concerns about corporate earnings due to a strong yen,” he said.

Minami added that fears about harmful consequences from Britain’s vote to leave the European Union could make Japanese firms more cautious about investing.

The Cabinet Office will publish the data at 8:50 a.m. on Monday (Sunday 2350 GMT).

On Tuesday, the Bank of Japan will announce the June corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services.

The CGPI was expected to fall 4.2 percent in the year to June, a 15th straight monthly fall reflecting weak domestic demand and the strong yen pushing down import prices.

There is growing speculation that the BOJ will adopt fresh stimulus at its policy meeting later this month as weak consumption, the strong yen and external headwinds hold back growth and stifle inflation.

(Reporting by Kaori Kaneko; Editing by Eric Meijer)