July 10, 2017 9:07 am JST  (Updated July 10, 2017 11:10 am JST)

Japan's May machinery orders fall 3.6%, assessment downgraded

TOKYO (Kyodo) -- Japan's core private-sector machinery orders unexpectedly fell in May for the second consecutive month of decline, due to weakness in the service sector, the government said Monday, downgrading its assessment of the key gauge of companies' future capital spending.

 The orders, which exclude those for ships and from utilities because of their volatility, fell a seasonally adjusted 3.6 percent in May from the previous month to 805.5 billion yen ($7.1 billion), according to a report by the Cabinet Office. The drop came after a 3.1 percent fall in April.

 The Cabinet Office, which previously had said the recovery in machinery orders was slowing, said it has "come to a standstill." It was the office's first assessment downgrade in eight months.

 Orders from the nonmanufacturing sector dropped 5.1 percent to 447.3 billion yen, hit by reduced orders from railway operators. Orders for telecommunication and construction equipment also fell.

 Manufacturing sector orders were up 1.0 percent for the fourth consecutive month of growth to 365.6 billion yen, reflecting solid orders for thermal and hydraulic power generators and ship engines.

 "Although machinery orders are volatile, we revised down our assessment given their fall of some 3 percent for the second consecutive month amid weakness in the nonmanufacturing sector," a Cabinet Office official said.

 Overseas demand for Japanese machinery, an indicator of future exports, fell 5.2 percent to 941.4 billion yen.

 Total orders, including those from the domestic public sector and abroad, were down 3.1 percent at 2.22 trillion yen, the data showed.

 For the current quarter through June, core machinery orders are expected to slip 5.9 percent from the previous quarter, the office said.

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