Japan’s machinery orders unexpectedly rose even amid factory shutdowns, power shortages and supply- chain disruptions caused by a record earthquake.
Factory orders rose 2.9 percent in March from February, when they dropped a revised 1.9 percent, the Cabinet Office said today in Tokyo. Orders, an indicator of capital spending in three to six months, were projected to fall 10 percent, according to the median forecast of 24 economists surveyed by Bloomberg News.
The report bolsters the view that the world’s third-biggest economy is regaining momentum after the earthquake and tsunami that left more than 24,000 dead or missing and caused a nuclear radiation crisis. Tokyo-based Hitachi Construction Machinery Co., the world’s biggest maker of giant excavators, said it expects to be back to full production capacity as early as this week.
“We thought it was too soon for companies to get their reconstruction plans in place, but this shows that they were already preparing to repair their facilities in March,” said Yoshimasa Maruyama, a senior economist at Itochu Corp. in Tokyo. “Japanese manufacturing’s going to be back earlier than we had expected, and we’ll soon start to see capital spending boosts as well.”
The yen traded at 81.03 per dollar at 10:57 a.m. in Tokyo, and the Nikkei 225 Stock Average fell 0.6 percent to 9,592.71.
Restrictions Relaxed
The government is asking companies and households to restrict power use by 15 percent this summer, less than its earlier prediction that savings of at least 20 percent would be necessary. Tokyo Electric Power Co. said on May 13 it plans to raise its power capacity to 56.2 million kilowatts by the end of August, 94 percent of last summer’s peak.
Companies surveyed by the government forecast orders will increase 10 percent in the three months ending June 30, the report showed, which would be the biggest advance since 1989. From a year earlier, machinery orders rose 6.8 percent in March, today’s report showed.
Production at five Hitachi Construction plants in Ibaraki prefecture, north of Tokyo, will probably return to 100 percent capacity this week, Chief Executive Officer Michijiro Kikawa said in an interview. Output in late April dipped to 60 percent of capacity, he said.
“We still face uncertainties about procurement of some parts,” Kikawa, 63, said on May 11. “But things are far better.”
Output Increases
A government report showed last month that companies plan to increase factory output 3.9 percent in April and 2.7 percent in May, after a record decline in March.
Nissan Motor Co.’s net income was 30.8 billion yen ($380 million) for the three months ended March 31, beating the 23 billion yen average of five analysts’ estimates compiled by Bloomberg.
Japan’s economy probably contracted at an annual 2 percent pace in the three months ended March 31, according to the median estimate of 22 economists surveyed by the Bloomberg News. That would be the first time the economy shrank for two straight quarters since the global financial crisis. The report will be released May 19.
“The level of economic activity may already be on the mend,” Hiroshi Shiraishi, an economist at BNP Paribas SA in Tokyo, said before the report. “With the outlook for power supply this summer so much better than before, it now seems likely that the economy will continue trending higher.”
Better Than Expected
Economic and Fiscal Policy Minister Kaoru Yosano last week expressed optimism about a turnaround, saying that the disaster’s effect on output was “smaller than first thought.”
Prime Minister Naoto Kan’s administration plans a second extra budget to pay for reconstruction, following an initial 4 trillion yen ($50 billion) package that it says may create about 200,000 jobs. The government in March estimated that damage from the disaster may swell to as high as 25 trillion yen.
Companies said it’s hard to predict how the earthquake will affect machine orders in coming months, said Minoru Masujima, head of statistics at the Cabinet Office.
“Given the current state of the economy after the quake, corporate earnings will likely deteriorate toward the July- September period and growth expectations are low,” Hiroshi Watanabe, an economist at the Daiwa Institute of Research in Tokyo. “We should stay cautious about the outlook for capital spending.”
Producer Prices
Japan’s producer prices rose 2.5 percent in April from a year earlier, the biggest jump since October 2008, a separate report released by the Bank of Japan showed in Tokyo today. The median estimate of 20 economists surveyed by Bloomberg News was for a 2.1 percent increase.
The central bank will “carefully monitor” whether sustained gains in oil gains will spur inflation expectations, Governor Masaaki Shirakawa said on April 28. The March 11 earthquake may only have a small effect on Japan’s prices should longer-term inflation expectations remain stable, the bank said in a report released last week.
Source: Bloomberg By
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