Japan corporate orders, mood sink; tough Q4 seen

Thu Nov 10, 2011 1:53am EST
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By Leika Kihara and Rie Ishiguro

TOKYO (Reuters) - A key gauge of Japan's corporate capital spending fell more than expected in September and manufacturers expect a further drop this quarter as business confidence sags in the face of the strong yen and slowing global growth.

The data herald a rough patch in the economy's recovery from a devastating earthquake and tsunami in March, with some economists warning it may shrink again this final quarter, given the added impact of floods in Thailand, Asia's major production base.

Core machinery orders, a leading indicator of capital spending six to nine months ahead, fell 8.2 percent from the previous month, bigger than a median market forecast for a 7.5 percent fall, government data showed on Thursday.

Manufacturers expect core orders to fall 3.8 percent in October-December following three straight quarters of rises that were supported by companies' efforts to mend broken supply chains and facilities after the March disaster.

A Reuters survey published on Thursday showed manufacturers' sentiment worsened for the second straight month in November and they expected further deterioration three months ahead.

"The machinery order data signals corporate activity will stagnate toward the year-end," said Yuichi Kodama, an economist with Meiji Yasuda Life Insurance.

"Japan's economy is likely to hold steady at best in the final quarter of this year and may contract again after a rebound in the previous quarter, as the government's third supplementary budget for reconstruction hasn't been enacted yet."


<p>A man looks at an electronic board displaying stock prices outside a brokerage in Tokyo November 10, 2011. REUTERS/Toru Hanai</p>