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Economy

Japan's machine tool orders fall sharply as China demand wanes

Trade war stokes reluctance to invest in automobile and electronics factories

Japan's total machine tool orders in June fall short of 100 billion yen -- a threshold often regarded as an indicator of a healthy industry -- for the first time in 32 months.

TOKYO -- Chinese orders for Japanese machine tools in June declined 59.7%, to 11.5 billion yen ($106 million), as the U.S.-China trade war has made manufacturers reluctant to invest in facilities.

It was the 16th month in a row for Chinese orders to tumble year-on-year.

Machine tool orders from China's automobile sector fell 76.4% in June to 3.2 billion yen.

"Since May, we have been receiving fewer orders than expected from China," an auto parts maker executive said. Toshiba Machine Chairman Yukio Iimura, who leads the Japan Machine Tool Builders Association, said Chinese demand is weaker in inland regions.

Machine tool exports to China had also been supported by brisk demand for smartphones, but this began to wane in the late 2018.

The U.S.-China trade war has chilled facility investments in the auto, electronics and precision instruments industries.

Japan's total monthly machine tool orders in June fell 37.9%, to 98.9 billion yen, falling short of 100 billion yen -- a threshold often regarded as an indicator of a healthy industry -- for the first time in 32 months, according to data released on Tuesday by the Japan Machine Tool Builders' Association.

Global machine tool demand from the auto industry was sluggish in June. Orders from overseas dipped 53.7%, to 14 billion yen, while domestic orders dropped 50.2%, to 10.7 billion yen.

An industry source said some auto parts makers are hesitant to purchase machine tools because automakers are indecisive about where to invest. The uncertainties bringing on this confusion include the U.S.'s Iran sanctions and the percolating situation along the Strait of Hormuz as well as expected U.S.-Japan trade negotiations.

Meanwhile, optimism is fading regarding a global economic recovery in the second half of the year. Iimura of the Japan Machine Tool Builders Association hinted he would make a downward revision in September on total orders for the full year. The current estimate is for orders worth 1.6 trillion yen.

"Everything is on a downward trend," Iimura said. "It is difficult to forecast unless the uncertainty over international affairs is cleared up."

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