Japan May machinery orders increase for the third consecutive month Reuters

Daniel Leussink

Tokyo (Reuters)-Japan’s core machinery orders in May increased for the third consecutive month, which is a welcome sign for an economy that is struggling to overcome the impact of the coronavirus pandemic.

The government implemented a new state of emergency in Tokyo that will last until August 22 in an attempt to control the health crisis, which casts a shadow over the prospects for economic growth.

The increase in core orders indicates a modest recovery in business spending, which policymakers believe is a necessary condition for accelerating economic recovery, and the economic outlook is clouded by the latest coronavirus emergency.

Core machinery orders are a highly volatile data series that is regarded as an indicator of capital expenditures in the next 6 to 9 months. It increased by 7.8% in May, exceeding the 2.6% growth predicted by economists surveyed by Reuters.

According to data released by the Cabinet Office on Monday, by industry, manufacturer orders increased by 2.8%, driven by electric motors, while non-manufacturer orders increased by 10.0%, rebounding from the sharp decline last month, and other non-manufacturers and the telecommunications industry led the gains. .

The government has increased its assessment of machinery orders, saying they are showing signs of picking up.

Japanese Prime Minister Yoshihide Suga said when declaring a state of emergency last week that the key is to prevent Tokyo, which hosts the Olympics, from becoming an outbreak point for new infections.

But with this move, Yoshihide Suga may harm Japan’s economic recovery. The First Life Research Institute estimates that the state of emergency may cut about 1 trillion yen ($9.1 billion) from GDP and cut 55,000 jobs in the next few months.

Legislators from the Prime Minister’s Liberal Democratic Party have escalated their calls for a new rescue plan, and the party’s heavyweight Toshihiro Nikai said an additional budget of about 30 trillion yen (US$270 billion) is needed.

On Sunday, Chief Cabinet Secretary Kato Katsunobu said that Japan stands ready to inject more funds into the economy to provide support to businesses and people in need.

Compared with the same period last year, core machinery orders excluding ships and electricity increased by 12.2% in May, exceeding the 6.3% expected by economists.

(1 USD = 109.8500 yen)