Japan's core machinery orders plummeted a seasonally adjusted 14.4 percent in November from a month earlier, marking the first decline in three months, the Cabinet Office said Thursday.
The orders, excluding volatile ones for ships and utilities, totaled 773.8 billion yen (6.6 billion U.S. dollars) in the recording period, with the figure coming in well below median analysts' estimates.
Economists, in stark contrast to the 14.4 percent slump, had on average predicted an on-month decline of 7.9 percent. The government, however, despite the larger-than-expected decline, opted to maintain its basic assessment of core machinery orders, stating that the order was showing "signs of picking up."
The latest machinery orders data comes against a backdrop of a global oil glut as well as geopolitical concerns in the Middle East, all of which have compounded market fears for the global economic outlook.
Prime Minister Shinzo Abe is relying on business expenditure to bolster the economy based on robust profits from the private sector recently, but the investment from corporations, which translates to 15 percent of GDP, will, based on the latest data, be of concern to Abe and his second installment of "Abenomics" as business spending is key to his economic reform policies and a core component of the government's record budget for the next fiscal year.
The reduction of corporate tax to less than 30 percent from the next fiscal year and favorable borrowing costs, however, may act as a catalyst for corporations to increase capital expenditure in the mid-term, although analysts say this remains to be seen.
The Cabinet Office said in its report that orders from the manufacturing sector retreated 10.2 percent to 338.3 billion yen following a 14.5 percent increase in October, and orders from the non-manufacturing sector fell 18.0 percent to 437.9 billion yen.
Total orders across the board tumbled 23.2 percent to 2.15 trillion yen, while foreign demand dropped 25.0 percent to 970 billion yen after leaping 41.6 percent in October, the government data showed.
Machinery orders are a key advance indicator for corporate capital spending and the government uses the data to predict the strength of business spending in a six- to nine-month period ahead.
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