Jan 09, 2015
Japan's leading indicator of capital expenditure probably rebounded in November, a Reuters poll showed, as strong corporate earnings on the back of a weak yen encouraged more firms to spend.
The nation's current account balance will likely show a modest surplus in November helped by a lower trade deficit due to falling oil prices and a rise in income from overseas investment due to the soft yen.
Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, likely rose 5.0 per cent in November from the previous month, the poll of 21 analysts showed.
That compared with a 6.4 per cent fall in October and followed a 2.9 per cent rise in September.
Compared with a year earlier, core orders probably fell 5.8 per cent in November, the poll found, down for the second straight month.
Still, the economy is expected to emerge from recession in the last three months of 2014, after unexpectedly contracting following a sharper-than-expected drop in consumption following a sales tax hike last April.
"The appetite for capital spending among firms, especially the big manufacturing sector, is on the rise as the impact from the yen's weakness on boosting corporate earnings is big," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
Analysts say firms' capital spending is expected to recover but only at a modest pace.
"We expect a moderate increase (in core machinery orders) although there are some weakness seen reflecting stalling domestic demand and a stagnant volume of exports," said Takeshi Minami, chief economist at Norinchukin Research Institute.
The Cabinet Office will release the data at 8:50 am on January 15.
The poll also showed the current account balance, which will be released on Monday, is expected to show a surplus of 133.2 billion yen ($1.12 billion) in November, which would be a five straight monthly surplus.
"Falls in oil prices contributed to a narrowing trade deficit and the weak yen helped gains in the income balance," said Tsunoda at Shinkin Central Bank Research Institute.
But the expected surplus for November will be smaller than a surplus of 833.4 billion yen in October.
Wholesale prices, which measures the price companies charge each other for goods and prices, likely rose 2.1 per cent in the year to December following a 2.7 per cent gain in November, the poll showed.
Source: The Economic Times