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 user 2005-07-12 at 10:10:00 am Views: 84
  • #11973
    Japan’s Machinery Orders Fell More Than Expected

    July 05 — Japan’s companies cut orders for machinery more than expected in May, raising concern electronics makers have been slow to reduce inventories that are curbing investment.

    Private machinery orders, excluding shipping and utilities, fell a seasonally adjusted 6.7 percent from April, the Cabinet Office said in a release in Tokyo. The median estimate of 27 economists in a Bloomberg survey was for a 2 percent decline.

    Japan’s exports rose by the smallest margin in 18 months in May, making it harder for electronics companies including Olympus Corp. to cut inventories that piled up after they overestimated demand. A further slowdown in overseas sales may make it harder to raise capital spending, said Yasukazu Shimizu, an economist at Mizuho Securities Co.

    “It’s going to be difficult to envisage stronger capital spending until we see the end of the inventory adjustment,” said Shimizu, the only economist in the survey to correctly predict the size of the decline. “Profit increases are based on an expectation exports will rebound.”

    Stocks fell after the report, led by machinery makers including Fanuc Ltd. and Tokyo Electron Ltd. The Nikkei 225 Stock Index was down 0.2 percent to 11,565.99 at the 3 p.m. close of trading in Tokyo after rising as much as 0.5 percent. The yen was little changed at 112.27 to the dollar at 4:06 p.m.

    Orders from manufacturers fell 20.6 percent in May, today’s report showed. Orders from non-manufacturers rose 1.5 percent. Machinery orders point to capital spending in three to six months.

    Electrical Machinery

    Makers of electrical machinery cut orders by 17 percent in May. Chemical companies reduced orders by 46 percent after raising them 77 percent in April.

    The drop in orders from manufactures in May followed a 14.4 percent increase in April. Orders from manufacturers in April rose to 510.5 billion yen ($4.6 billion), the highest since February 1997.

    Olympus, which gets a third of its sales from cameras and other visual-related equipment, is paring inventories as prices fall. The company said on June 6 it plans to reduce camera stockpiles and shut two unprofitable factories in Japan.

    Exports rose 1.4 percent in May from a year earlier, the smallest gain since shipments dropped in November 2003. Overseas sales to China dropped 0.1 percent in May. Export growth to the U.S. slowed to 3.4 percent from 7 percent in April.


    Japanese orders of electronic and communications-related machinery dropped 5.7 percent, the second month of declines, while orders of heavy electronic machinery slumped 37.1 percent, today’s report said.

    Today’s report contrasts with the Bank of Japan’s Tankan survey on July 1, which showed both large manufacturers and service companies raised their outlook for capital spending for the fiscal year ending April 1.

    Large manufacturers plan to increase spending by 16.2 percent, more than the 3.4 percent they planned in March. Non- manufacturers plan to raise investment by 6.1 percent, compared with a drop of 0.3 percent.

    Canon Inc., the world’s biggest seller of digital cameras, plans to spend 80 billion yen building an ink and toner-cartridge factory in southwestern Japan, the company said on June 17. Canon said it will begin production at the plant in January 2007.


    Orders from Toyota Motor Corp. and other automakers reached a 16-year high in April as they invested in plants and equipment. Japanese automakers are likely to buy Japanese-made robots and machines for domestic and overseas projects, says Koji Endo, an auto analyst at Credit Suisse First Boston in Tokyo.

    A Bank of Japan survey showed on July 6 that corporate spending in all the nine regions of Japan is improving.

    Record oil prices may take a toll on profit margins and prompt companies to curb spending, said Yasuhiro Onakado, chief economist at Daiwa SB Investments Ltd.

    “Companies are saying they’re going to be earning well at the end of the year,” Onakado said. “But the higher oil prices could attack profit margins and could potentially cause them to revise down their spending plans.”

    The pace of growth of machinery orders, which point to capital spending in three to six months, slowed in the first quarter as electronics makers reduced stockpiles.

    Machinery orders rose 0.8 percent in the first quarter, after increasing 5.7 percent in the previous three months, Cabinet Office data shows.