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Economy

Japan's November machinery orders rise 1.5%, but outlook unclear

Uptick marks 2nd straight monthly increase as Cabinet Office upgrades assessment

Part of the Keihin Industrial Zone in Kawasaki, Japan   © Reuters

TOKYO (Kyodo) -- Japan's core private-sector machinery orders rose 1.5 percent in November from the previous month for the second straight month of increase, government data showed Thursday, but the outlook remains uncertain amid the economic fallout from a resurgence of the novel coronavirus.

Following a 17.1 percent expansion in October, the orders, which exclude those for ships and from electricity utilities due to their volatility, totaled 854.83 billion yen ($8.2 billion), according to the Cabinet Office. Machinery orders are seen as a leading indicator of capital spending.

The office upgraded its assessment for the second month in row, saying that machinery orders are showing "signs of picking up," the most optimistic expression since August 2019 when the same words were used. In October, it said the orders were "bottoming out."

Machinery orders from nonmanufacturers grew 5.6 percent to 510.87 billion yen, marking the third straight monthly growth but slowing the pace of rise from the previous month's 13.8 percent. Sectors such as telecommunications and construction firms largely contributed to the increase.

"As for telecommunications investment, we believe that the growth has been underpinned by demand for capital expenditure on 5G networks as well as equipment to work from home (amid the pandemic)," a government official told reporters.

Orders from manufacturers, meanwhile, were down 2.4 percent to 345.22 billion yen, the first drop in three months, following an 11.4 percent rise in October. Some industries including nonferrous metal makers saw declines after their recent gains.

In Japan, a third wave of coronavirus infections has led to increased uncertainty over the economy. The government on Wednesday expanded its second state of emergency to a number of other areas after declaring it in the Tokyo region last week.

"The situation (in the reporting month) was good, but we need to closely monitor downside risks, which could materialize depending on the spread of the virus," the official said.

The Japanese economy suffered its worst contraction in the April-June quarter after the previous state of emergency, placed between April and May, significantly hurt private consumption and business investment.

Total machinery orders in November were down 1.5 percent to 2.27 trillion yen, following a 9.7 percent rise in October.

Orders from overseas, seen as an indicator of future exports, climbed 5.9 percent to 978.54 billion yen, up for the second consecutive month. Those from the public sector inched up 0.4 percent to 249.29 billion yen, following a 22.7 percent plunge the previous month.

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