Japan Downgrades Machinery Orders Outlook after a Larger-Than-Expected Drop in Core Orders

Japan’s Cabinet Office announced on Monday that the country’s core machinery orders decreased more than expected, raising concerns for the country over its slow economic recovery.

The country’s core orders, a leading indicator for the capital spending of Japan in the next six to nine months, declined by 1.7% MoM in January, which was larger than a 1% drop expected by economists in a Reuters poll.

Kota Suzuki, an economist at Daiwa Securities, noted that the decline might come from difficulties in the automaker sector and uncertainty on the effect of the New Year’s Day earthquake in Noto Peninsula.

The Cabinet Office also stated that they were uncertain if irregularities in certification tests by Toyota Motor’s affiliate Toyota Industries had any impact on the slump of the sector.

As a result, the drop had prompted the government to downgrade its view of machinery orders from “stalling” to “showing some weakness,” in which it was the first time since November 2022.