Japan's machinery orders fell unexpectedly

September in Japan was marked by a sharp decline in machinery orders. This is a sign that Japanese industry is dependent on the global economy. With the global economy slowing and imports becoming more expensive, companies' capital spending plans are likely to change.

The percentage of core orders is a key indicator that determines the amount of capital expenditures of a company or enterprise for 2-3 quarters ahead. According to economists' forecasts, August was supposed to be a month of slight growth of 0.7%. However, core orders declined by 5.8% in August. 

In September the trend continued and orders fell by 4.6%. Whereas the last year growth of orders in September was 2.9% (excluding volatile indicators). 

Quarterly forecasts sound more positive. After dropping 1.6% in the third quarter of this year, manufacturers expect core orders to increase 3.6% in the fourth quarter.

Takumi Tsunoda, chief economist at the Shinkin Central Bank Research Institute, based on the expectations of manufacturers and their good profits, said that capital spending would rise.

He added that the investment plans once postponed due to supply chain problems are likely to be fulfilled. Although the possibility of risks can’t be ruled out. Thus, according to Tsunoda, a slowdown in economic growth and higher energy prices could hinder investment plans.