Japanese core machinery orders, the key leading indicator of business investment in equipment, slipped back 1.2% on the month (vs. consensus +0.6%). The decline in this highly volatile data series was led by weaker orders for boilers/turbines and engines from manufacturers as well as those for trains and cranes/conveyors from non-manufacturers.

The Cabinet Office forecast core orders would dip 2.3% in the first quarter of 2025. In the October-December quarter, the core measure rose 2.9% on quarter after falling the previous two quarters (-1.3% in Q3, -01% in Q2), which was below the official projection of a 5.7% increase but above the median economist forecast of a 0.6% rise.

The Cabinet Office maintained its assessment after upgrading it for the first time in eight months for the November data, saying, Machinery orders are showing signs of a pickup. Capex plans are generally supported by demand for automation amid widespread labor shortages as well as government-led digital transformation and emission control.

From a year earlier, core orders, which track the private sector and exclude volatile orders from electric utilities and for ships, rose 4.3% after jumping 10.3% in November (vs. consensus +8.0%).

Japanese core machinery orders, the key leading indicator of business investment in equipment, are forecast to edge up 0.6% (range: -3.3% to +3.0%) on the month in December after surging an unexpectedly high 3.5% in November. Capex plans are generally supported by demand for automation amid widespread labor shortages as well as government-led digital transformation and emission control.

In the October-December quarter, the core measure is forecast by economists to rise 3.5% on quarter after falling the previous two quarters (-1.3% in Q3, -01% in Q2), which would be below the official projection of a 5.7% increase.

From a year earlier, core orders, which track the private sector and exclude volatile orders from electric utilities and for ships, are expected to show their seventh gain in 12 months, up 8.0% after jumping 10.3% previously.

Machine Orders are the total value of new private-sector purchase orders placed with manufacturers for machines excluding volatile items such as ships and utilities. It is a leading indicator of production. Analysts consider the data an indicator of capital spending. Rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.

It is a leading indicator of production. Rising purchase orders signal that manufacturers will increase activity as they work to fill the orders. The importance of machinery orders cannot be overstated given the economy's dependence on exports. The purpose of these data is to get a picture of machinery manufacturers' order books and to collect basic material for analyzing the direction of the economy through an early understanding of trends in capital investment in machinery.