| Consensus | Consensus Range | Actual | Previous | |
| Month over Month | 3.1% | -1.0% to 5.0% | 4.2% | -0.9% |
| Year over Year | 7.6% | 0.0% to 8.7% | 11.6% | 1.6% |
Highlights
Japan's core machinery orders, a key leading indicator of business investment in equipment and software, posted their first month-on-month increase in three months in September, up a solid 4.2% (vs. consensus +3.1%), reflecting the potential need to upgrade and digitize factories, offices and shops amid widespread labor shortages. It followed a 0.9% dip in August and a 4.6% plunge in July.
But the three-month moving average of the core measure fell 0.5% for the fourth consecutive decline, highlighting the underlying weakness amid uncertainty over global growth hit by the protectionist U.S. trade policy as well as sluggish domestic demand in the face of sticky inflation. This prompted the Cabinet Office to maintain its view on the indicator after it downgraded its view last month for the first time since the May 2024 report. It now said the pickup in machinery orders are"stalling," compared to the previews statement that orders were"showing signs of a pickup."
In the July-September quarter, the core measure fell 2.1% on quarter as largely expected (consensus -2.5%) after edging up 0.4% in April-June, rising 3.9% in January-March and rebounding 2.3% in October-December. It is the first decline in four quarters but firmer than the official projection of a 4.0% slump.The Cabinet Office expects core orders to be nearly flat in the October-December quarter, up just 0.2% from the previous three-month period.
From a year earlier, core orders, excluding those from electric utilities and for ships, jumped 11.6% for the 12th straight increase, following a 1.6% gain in August and coming in much stronger than the median economist forecast of a 7.6% rise.
Market Consensus Before Announcement
Japan’s core machinery orders, a key leading indicator of business investment in equipment and software, are expected to post their first month-on-month increase in three months in September, up 3.1%, reflecting the need to upgrade and digitize factories, offices and shops amid widespread labor shortages. It would follow a 0.9% dip in August and a 4.6% plunge in July.
In the July-September quarter, the core measure is forecast by economists to show a 2.5% drop on quarter after edging up 0.4% in April-June, rising 3.9% in January-March and rebounding 2.3% in October-December. That would be its first decline in four quarters but firmer than the official projection of a 4.0% slump.
From a year earlier, core orders, excluding those from electric utilities and for ships, are forecast to rise 7.6% for a 12th straight increase, following a 1.6% gain in August.
Last month, the Cabinet Office downgraded its view on the indicator for the first time since the May 2024 report. It now said the pickup in machinery orders are"stalling," compared to the previous statement that orders were"showing signs of a pickup."
Definition
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.
Description
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.