Business

Editor: Sharon Li
10 Oct 2008 03:20:00 GMT

ORDERS for Japanese machinery have fallen for a third month in August, the longest losing streak since the country’s last recession in 2001.

Equipment orders, an indicator of capital spending in the next three to six months, declined 14.5 percent from July, the steepest drop in two years, the Cabinet Office said in Tokyo yesterday. Economists surveyed by Bloomberg News had predicted a 2.8-percent decrease.

The Nikkei 225 Stock Average has lost more than a quarter of its value since August as the global financial crisis threatens exports for Japan’s biggest manufacturers.

Profit at Toyota Motor Corp, the country’s biggest company, is likely to fall this fiscal year for the first time in a decade, the Nikkei newspaper reported.

“The export outlook is really very bleak, to both the United States, and parts of Europe and increasingly to China,” said Richard Jerram, chief economist at Macquarie Securities Ltd in Tokyo. “It’s hard to see how it will avoid getting quite a bit worse over the next six to nine months.”

The Cabinet Office downgraded its assessment of machinery orders for the first time in five months, describing them as “falling,” language it hadn’t used since April 2002. The steepness of yesterday’s drop means orders are almost certain to fall in the third quarter, the first quarterly decline in five years.

The Nikkei rose 1.3 percent at the lunch break in Tokyo yesterday, rebounding from its steepest drop in two decades a day earlier.

The yen weakened to 100.44 per dollar from 99.75 before the report was published. The yen has gained 5.6 percent this month, eroding repatriated profits for exporters and making their products dearer abroad.

Orders from manufacturers slid 13.9 percent and those from service companies fell 14.9 percent. Bookings from manufacturers fell, led by equipment used to make semiconductors and cars. In service firms, orders for computers and train cars were the biggest contributors to the slump.

“Capital spending is very weak and it will get weaker,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. “With their stocks plunging and overseas demand falling off sharply, companies want to save money.”

Toyota, which gets half of its income from the US, is likely to report a 40-percent drop in operating profit in the year ending March 31.