Japan's machine orders fall in May against expectations for a rise

Japan’s machinery orders fell during the month of May, against expectations of a rise as a strong domestic currency coupled with weak demand weighed on corporate profits that led to a fall in business investment needed for sustainable growth.

Japan’s core machinery orders witnessed a fall of 1.4 percent, reversing market expectations of a rise of 2.6 percent, according to a recent Reuters poll. The orders, widely viewed as a leading indicator of future capital spending, totaled 785.0 billion yen (USD7.8 billion), data released by Japan’s Cabinet Office showed Monday.

Further, compared with a year earlier, core orders, which exclude those of ships and electricity, decreased 11.7 percent in May, versus expectations of an 8.7 percent decline.

In addition, Britain’s vote for exit last month from the European Union has clouded investor and exporter sentiments in the country, besides, pushing up the already-rising safe-haven yen and curbing exports.

Compared to the previous month, orders from manufacturers fell 6.4 percent, while those from the services sector dropped 0.3 percent, the data showed. Moreover, overseas demand for Japanese machinery, an indicator of future exports, slid 14.8 percent to 740.7 billion yen.

The government has downgraded its basic assessment of core machinery orders, saying they are now at a standstill. For April data, it said orders declined sharply though they had shown "signs of picking up," reports said.

Meanwhile, policymakers seem caught up as companies remain hesitant to boost investment in an environment of struggle, coupled with a weak economy and strong currency. Also, the negative interest rates undertaken by the Bank of Japan has failed to spur investor confidence in the economy.