Japan machinery orders fall, BOJ warns of overseas risks

Wed Nov 13, 2013 4:41am EST
 
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By Tetsushi Kajimoto and Leika Kihara

TOKYO/MATSUMOTO, Japan (Reuters) - Japan's core machinery orders fell more than expected and a central banker warned of headwinds from soft overseas growth, underscoring the difficulties of sustaining the economic recovery Prime Minister Shinzo Abe's stimulus policies generated.

Board member Ryuzo Miyao stressed the Bank of Japan's readiness to loosen monetary policy again should the global economy and domestic wages fail to pick up, forcing a change to the central bank's upbeat economic forecasts.

"I see risks somewhat tilted toward the downside for both the economy and prices," said Miyao, who is among those in the nine-member board relatively pessimistic about the outlook.

"If the BOJ were to act again, it won't rule out any policy steps in advance," he told a news conference on Wednesday after meeting with business leaders in Matsumoto, northwestern Japan.

Miyao's comments came after data showed core machinery orders, a volatile series regarded as a leading indicator of capital expenditure, fell 2.1 percent in September, more than a median market forecast for a 1.4 percent drop.

Firms surveyed by the government forecast that core orders would fall 2.1 percent in the final three months of 2013 after two straight quarters of increases, suggesting that business investment remains the weak link in keeping the economy afloat.

Sluggish capital spending is a source of concern for Abe, who needs a pick-up in business investment to help drive a sustained recovery in the economy after 15 years of deflation.

Still, the government stuck to its assessment that machinery orders are picking up, and analysts said capital spending still seemed on track for a gradual recovery.   Continued...

 
A man produces machine parts inside a factory in Tokyo August 12, 2013. REUTERS/Yuya Shino