Japan’s Machinery Orders Slip for the First Time in 5 Months

Orders for core machinery in Japan fell for the first time in five months in January. This is a disturbing sign for Japan's economy, which is already facing increased pressure from the Ukraine war and rising energy and raw material prices.

Declining core orders undermine expectations that a recovery in corporate spending will support private demand in the world's third-largest economy, as companies are tackling rising input prices, chip shortages and supply disruptions.

Japanese companies can even delay spending plans due to higher commodity and transportation costs that are sending wholesale inflation soaring and squeezing corporate margins. Core orders excluding the volatile numbers from shipping and electric power utilities have advanced 5.1% in January.

According to cabinet data, core orders, a highly volatile set of data that is considered as an indicator of capital investment for the next 6-9 months, contracted 2.0% from December to January, starting in 5 months. 

After shrinking in the third quarter of last year, the Japanese economy returned to growth from October to December. However, the recovery was slower than initially expected due to slower growth in consumer spending and capital investment.