Japan’s May machinery orders post third month of gains

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TOKYO (Reuters) – Japan’s core machinery orders rose for the third straight month in May, a welcome sign for an economy struggling to overcome the hit from the coronavirus pandemic.

The government imposed a new state of emergency in Tokyo that will run through to Aug. 22 in an attempt to control the health crisis, a move that clouds the outlook for economic growth.

The jump in core orders indicates a modest revival in corporate spending, seen by policymakers as necessary to accelerate the recovery in an economy that saw its outlook clouded by the latest coronavirus emergency.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, jumped 7.8% in May, beating a 2.6% expansion forecast by economists in a Reuters poll.

By sector, orders from manufacturers grew 2.8%, boosted by electrical machinery, while those from non-manufacturers rose 10.0%, rebounding from the prior month’s sharp decline, led by other non-manufacturers and telecommunications, the Cabinet Office data showed on Monday.

The government raised its assessment on machinery orders, saying they were showing signs of pickup.

In declaring the state of emergency, Prime Minister Yoshihide Suga said last week it was key to prevent Tokyo, which is hosting the Olympic Games, from becoming a flashpoint of new infections.

But with the move, Suga risks hurting Japan’s economic recovery. Dai-ichi Life Research Institute estimated that the state of emergency could slash about 1 trillion yen ($9.1 billion) from gross domestic product and cut 55,000 jobs over the coming months.

Lawmakers from the prime minister’s Liberal Democratic Party have escalated calls for a new relief package, with party heavyweight Toshihiro Nikai saying an extra budget of around 30 trillion yen ($270 billion) is needed.

On Sunday, Chief Cabinet Secretary Katsunobu Kato said Japan stands ready to pump more money into the economy, providing support for businesses and people in need.

From a year earlier, core machinery orders, which exclude those for ships and electricity, rose 12.2% in May, beating a 6.3% advance expected by economists.

($1 = 109.8500 yen)

(Reporting by Daniel Leussink; Editing by Sam Holmes)



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