TOKYO -- Automakers, machinery builders and other manufacturers slashed investment even more sharply toward the end of 2019, accelerating the trend for a year dominated by worries about slowing global growth and the U.S.-China tariff disputes.
Orders for machine tools came to 89.9 billion yen ($817 million) in December, plunging 33.6% on the year and declining for the 15th straight month, the Japan Machine Tool Builders' Association said Wednesday.
Investment in machine tools totaled just 259 billion yen in the October-December period, down 36.3% on the year and the lowest fourth-quarter value since 2009. Third-quarter investment had shrunk by 35.1%.
The full-year total of 1.23 trillion yen dropped 32.3% from 2018, the first decrease in three years and the biggest slide since 2009. The annual figure missed an initial forecast by roughly 400 billion yen, after exporters watered down their investment plans as the trade frictions between Washington and Beijing escalated in the spring.
Orders from abroad dipped 32.7% to 52.7 billion yen for December, while orders placed by companies in Japan tumbled 34.9% to 37.2 billion yen.
"Demand is soft among automakers, construction machinery builders and other general machinery makers, both in Japan and China," said an official at Makino Milling Machine. Orders received by the machine tool maker plunged 40.1% to 5.2 billion yen for December.
The erosion of confidence persists in 2020. Sheet metal processor Hamano Products might buy new machine tools in the second half of the year, CEO Keiichi Hamano said, but "if the economic conditions weaken, we'll consider delaying the investment."
The tariff disputes create difficulties in deciding where to make investments, an official with an auto parts maker said. "Our profit depends on whether our products are hit by tariffs," the official said.
But with the U.S. and China signing the first phase of a trade deal Wednesday, some see the market headed for recovery. Orders for 2020 will dip only slightly to around 1.2 trillion yen, the Japanese association forecasts. The market will rebound after hitting bottom in the first half of the year, Chairman Yukio Iimura predicts.
Chipmaking equipment is expected to propel this growth, as the field likely will see increased demand amid advancement in technologies for 5G communication and artificial intelligence. Tokyo Electron budgeted 400 billion yen for research and development over three years starting in fiscal 2019, and the company plans new facilities in central and northeastern Japan.