February 9, 2018 / 6:42 AM / 8 months ago

Preview: Japan December machinery orders seen slipping temporarily, upward trend intact

TOKYO (Reuters) - Japan’s core machinery orders were projected to slip in December for the first time in three months, but economists expect any fall to be temporary and unlikely to break the upward trend, a Reuters poll showed on Friday.

Heavy machineries are seen next to a subway train at a construction site in Tokyo, Japan, March 13, 2016. REUTERS/Yuya Shino/Files

Core orders, a highly volatile data series regarded as an indicator of capital spending in six to nine months, were seen likely to fall 2.3 percent in December from November, the poll of 16 economists found.

The expected fall would follow 5.7 percent growth in November and 5.0 percent in October.

The poll found core orders, which exclude those for ships and from electric power utilities, were expected to rise an annual 2.2 percent in December.

“We keep our view that capital spending will gradually increase in the first half of 2018 on strong corporate profits and a growing shortage of capacity among manufacturers and non-manufacturers,” Yuichiro Nagai, economist at Barclays Securities Japan, said in the survey.

Analysts noted firms’ capital spending will also be supported by demand for labour-saving equipment in a very tight labour market, orders related to work on the 2020 Tokyo Olympics, and negative interest rates.

“Private firms’ capital spending appears to be entering the phase of self-sustained recovery,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

The Cabinet Office will release the machinery orders data at 8:50 a.m. Japan time on Feb. 15 (2350 GMT Feb. 14).

The poll also found that economists expect the Bank of Japan’s corporate goods price index (CGPI), due on Tuesday, to have risen an annual 2.7 percent in January, down from the 3.1 percent growth posted in December, as price gains in oil and coal products receded.

The CGPI, which measures the prices companies charge each other for their goods and services, was likely to rise 0.2 percent from the previous month, the poll found.

A separate poll found the economy was expected to grow for an eighth straight quarter in October-December on robust exports and solid domestic demand. The GDP data is due on Wednesday at 8:50 am Tokyo time, 2350 GMT on Tuesday.

Reporting by Kaori Kaneko; Editing by Eric Meijer

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