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Japan: Economic Fears Causes Japan Machinery Order Drop
Source: google.com
Source Date: Thursday, July 08, 2010
Focus: Citizen Engagement
Country: Japan
Created: Jul 12, 2010

A key indicator of Japanese corporate capital spending fell the most since 2008 in May, data showed Thursday, in a fresh sign that a fragile economic recovery may be losing momentum.

Japan's core private-sector machinery orders dropped 9.1 percent in May from the previous month as firms held back on business investment, the steepest decline since August 2008.

"Firms are not likely to add to their business investment actively in the near term as there is still the risk that (Japan's) economic growth will be hampered due to a possible slowdown in overseas economies," said Norio Miyagawa, economist at Mizuho Securities Research & Consulting.

The fall in the volatile indicator was the first decline in three months and much larger than the median forecast of a 3.0 percent decline in a survey of economists by Dow Jones Newswires and the Nikkei business daily.

Orders rose 4.0 percent in April compared with the previous month.

Exports have driven a recovery from recession by the world's second largest economy, but companies have eyed economic woes in Europe with concern.

The safe-haven yen has soared in recent months due to worries about the global economy, particularly Europe, which if continued will dent companies' repatriated profits and make their goods more expensive overseas.

A Bank of Japan survey last week showed that Japanese business confidence had turned optimistic for the first time since June 2008 as the corporate view of the economy improves.

But the latest data indicates that companies are worried about Japan's vulnerability to a global slowdown, say analysts.

Japan's domestic picture also remains fragile. Unemployment surprisingly edged higher in May to 5.2 percent, raising concerns about the country's ability to cultivate a self-sustaining recovery.

A separate report Thursday showed that Japan's current account surplus in May shrank for the first time in 10 months, hit by slower export growth and a drop in income on overseas investment, the finance ministry said.

The surplus in the current account -- the broadest measure of trade with the rest of the world -- came to 1.21 trillion yen (13.7 billion dollars), down by 8.1 percent from a year ago.

The trade surplus edged down 0.6 percent to 391.0 billion yen with exports rising 33.8 percent against a 37.8 percent rise in imports.

Despite remaining cautious about the impact of Europe's recent sovereign debt crisis on the global economy, Bank of Japan governor Masaaki Shirakawa said Thursday that Japan's domestic economy still showed signs of moderate recovery.
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