April 6, 2018 / 6:13 AM / 16 days ago

Japan February machinery orders seen lower, focus on yen movements

TOKYO (Reuters) - Japan’s notoriously fickle core machinery orders were expected to have fallen in February after January’s strong growth, a Reuters’ poll showed on Friday, although upbeat corporate earnings were seen supporting a quick rebound in demand.

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

But that rebound was at risk from a strong yen and international trade friction that could erode businesses’ confidence in economic growth and undermine their willingness to spend.

Machinery orders, a highly volatile data series regarded as an indicator of capital spending in six to nine months, were expected to slip 2.5 percent in February from January robust growth of 8.2 percent.

The poll of 16 economists found that core orders, which exclude those for ships and from electric power utilities, were seen likely to be flat in February from a year earlier.

“Machinery orders have been range-bound,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, but “they are expected to start picking up gradually thanks to the higher level of corporate earnings”.

Analysts noted the need to scrutinize movements in the yen because the vigor of the Japanese economy would depend on global economic growth.

“If the yen’s appreciation progresses and corporations become more cautious over the business outlook, machinery orders and capital spending may lose momentum,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

The Cabinet Office will announce the machinery orders data at 8:50 a.m. Japan time on April 11 (2350 GMT April 10).

CORPORATE GOODS PRICES SEEN RISING

The orders data will coincide with the Bank of Japan’s corporate goods price index (CGPI), which measures the prices companies charge each other for goods and services and is expected to have risen 2.0 percent in March versus a 2.5 percent rise in February.

The yen’s appreciation and slowing price growth for oil- and coal-related products were seen capping gains in the CGPI index, analysts said.

The central bank will publish the CGPI at the same time as machinery orders on April 11.

Japan Is expected to post a 2.16 trillion yen ($20.14 billion) current account surplus in February, the poll found.

Income gains from overseas investments were expected to support Japan’s current account surplus, but a slowdown in exports because of the Lunar New Year holidays would trim the surplus versus February last year, respondents said.

The ministry will publish the current account data at 8:50 a.m. on April 9.

Reporting by Kaori Kaneko; Editing by Eric Meijer

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