RPT-UPDATE 1-Japan machine orders show capex will be slow

(Repeats to fix formatting)

* Manufacturers’ capex growing slowly due to external demand

* Services sector cautious due to domestic consumption
(Adds economist’s quote, details)

By Tetsushi Kajimoto and Leika Kihara

TOKYO, March 10 (BestGrowthStock) – Japan’s core machinery orders
fell less than expected in January from the previous month,
easing concern that a recovery in corporate spending could slow
down and harm the economy.

Wholesale price deflation eased further in February on a
recent rise in commodity prices, but deflationary pressure is
likely to continue due to the big gap between supply and demand.

The machinery orders data offer evidence that capital
expenditure will continue to grow slowly this year as
manufacturers increase spending, supporting economic growth. But
the data also show non-manufacturers have been slow to increase
their spending due to weak domestic demand.

This could complicate economic policy for the government as
it tries to contain Japan’s huge outstanding debt and reverse
slumping approval ratings. It also highlights the need for the
Bank of Japan to take further steps to mitigate the second bout
of deflation in a decade.

“The machinery orders data confirms firmness in the recovery
of manufacturers,” said Junko Nishioka, chief economist at RBS
Securities in Tokyo.

“The absolute level of orders is still low, but since any
economic recovery begins with manufacturers and then spreads to
non-manufacturers, the data is slightly positive going forwards.”
Graphic on machinery orders http://link.reuters.com/hef63j
Graphic on wholesale prices http://link.reuters.com/gef63j
More stories on Japan’s economy [ID:nECONJP]
More stories on Japanese politics [ID:nPOLJP]

Core private-sector machinery orders, a highly volatile
series regarded as an indicator of capital spending, fell 3.7
percent in January, less than a median market forecast for a 4.1
percent decline. [JPMORD=ECI] (ECONJP: )

Orders from manufacturers rose 3.3 percent, the second
consecutive month of gains. Orders from non-manufacturers fell
12.9 percent for the first decline in two months.

Core orders, which exclude those for ships and machinery at
electric power firms, were 1.1 percent lower in January from the
same month a year earlier.

The Bank of Japan, under pressure from the government to do
more to fight deflation, could decide this month or next to offer
commercial banks more short-term funds. [ID:nTOE6230A7]

While economists doubt more cheap money will lift Japan’s
prices significantly, many argue that inaction would risk
worsening business and consumer sentiment.

Gross domestic product (GDP) for the fourth quarter likely
rose a revised 1.0 percent, down from a preliminary reading of
1.1 percent growth as capital spending recovered more slowly than
expected, a Reuters poll showed. Revised GDP data are due at 8:50
a.m. on March 11 (2350 GMT on March 10). [ID:nTOE62309G]

The 1.5 percent annual fall in wholesale prices, as measured
by the corporate goods price index (CGPI) in February, matched
the median forecast decline. [JPCGP=ECI] [JPCGPY=ECI]

Wholesale prices rose 0.1 percent in February from the
previous month, also matching the median estimate. Declines in
the CGPI has been slowing since September as oil prices are on
the rise again. Still, deflation is likely to persist due to the
large gap between supply and demand.

Japan pulled out of recession in April-June last year, helped
by a rebound in exports and industrial output as well as a rise
in consumption due to government subsidies. Economists expect
growth to slow early this year as the government cuts public
works and the impact of subsidies fades.

Stock Analysis

(Editing by Hugh Lawson)

RPT-UPDATE 1-Japan machine orders show capex will be slow