Japan's Machinery Orders Unexpectedly Rose in March (Update4)
Japan's Machinery Orders Unexpectedly Rose in March
May 13 (Bloomberg) -- Japan's machinery orders unexpectedly rose in March, led by electrical gear such as computer chip-making equipment, signaling that corporate spending may help extend a recovery in the world's second-largest economy.
Private machinery orders, excluding shipping and utilities, rose 1.9 percent from February, when they rose by a seasonally adjusted 4.9 percent, the Cabinet Office said in Tokyo today. For the quarter, orders rose 0.7 percent, the second quarterly gain.
Manufacturers including Sharp Corp. and Elpida Memory Inc. say they plan to increase spending on factories as demand for electronics goods rebounds. Gains in capital spending may fatten sales at equipment suppliers including Yokogawa Electric Corp. and bolster a recovery from last year's recession.
``Companies continue to use profits to invest in equipment,'' said Yasuo Yamamoto, a senior economist at Mizuho Research Institute, one of four who predicted the gain in orders. ``Capital spending looks very solid now and will be able to support growth.''
Orders rose to 1.03 trillion yen ($9.64 billion) in March, the Cabinet Office said. The median forecast of 30 economists surveyed by Bloomberg News was for a 1.5 percent drop.
The Nikkei 225 Stock Average rose as much as 0.2 percent after the report. It reversed the gain, ending 0.3 percent lower at 11,049.11 at 3 p.m. in Tokyo, after a Cabinet Office survey predicted orders would fall 3.1 percent in the second quarter from the first.
``Economic fundamentals remain stronger than the market reflects,'' said Kirby Daley, a strategist at Societe Generale Securities' Fimat unit in Tokyo.
Global Sales
Japan's recovery from a fourth recession since 1991 probably picked up pace in the first quarter as consumer and business spending rose, a government report on May 17 may show.
Gross domestic product expanded at a 2.5 percent annual pace, accelerating from 0.5 percent growth in the previous three months, according to the median forecast in a Bloomberg survey of 20 economists.
Yokogawa Electric, the world's biggest maker of electronic measuring instruments, said this week it expects profit to rise in the fiscal year that started April 1 as manufacturers boost spending on semiconductor-production equipment.
Global sales of equipment may rise as much as 5 percent this year as demand for consumer electronics increases, according to industry group Semiconductor Equipment & Materials International.
Memory Chips
Elpida Memory, the world's fifth-largest memory-chip maker, will increase capital spending to 143.6 billion yen in the fiscal year started April 1, more than the 100 billion yen it initially planned, President Yukio Sakamoto said on April 25.
Sharp, the world's biggest maker of liquid-crystal display televisions, said on April 26 it will raise capital spending 3.3 percent to 220 billion yen this business year. The amount includes 58 billion yen to be spent on its plant in Mie prefecture in central Japan, and 70 billion yen on producing larger screens, the company said.
Machinery orders point to capital spending in three to six months. Core orders exclude shipping and utilities orders, which tend to skew the results because of their size.
Large manufacturers plan to increase capital spending 3.4 percent in the year that started April 1, compared with growth of 22.7 percent last year, the Bank of Japan's quarterly Tankan survey showed on April 1. Large manufacturers are those with more than 1 billion yen of capital.
Foreign orders rose 2.8 percent in March, the first gain in three months, today's report said. For the fiscal year ended March 31, orders rose 6.5 percent, the government said.
To contact the reporter on this story: Lily Nonomiya in Tokyo at lnonomiya@bloomberg.net
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