(menafn – ecpulse) (Menafn - ecPulse)
Machine orders in Japan advanced in December after it sharply declined in November, giving us better outlook for business investments in the upcoming period. Increasing demand in the Asian region especially from China is encouraging Japanese manufacturers to enhance productivity, supporting recovery from the nation's deepest recession since WWII.
Machine orders in Japan rose 20.1% in December compared with a drop by 11.3% in November, and it came higher than analysts' estimates of 8.0%. On the yearly record, machine orders slid 1.5% less than the prior decline by 20.5%, and better than the forecasted decline by 10.8%.
Conditions in the business sector are getting better after global demand increased especially demand from China, Japan's first trade partner, which is encouraging exporters to increase capacity and production levels. Japanese exports advanced in the past few months which encouraged large manufacturers like Toyota Motor Corp to improve its earnings outlook after losses previously estimated.
However, overseas shipments rose 11.7% in December from a year earlier, recording the first yearly positive reading in 15 months, which makes us believe that capital spending will be rising over the next six months as companies are more optimistic about sales and profits. Imports declined 6.0% in December from a year earlier giving a chance for the current account surplus to widen for the fourth straight month.
Japan's current account surplus surged 453% in December recording 900.8 billion yen, while the trade balance surplus widened to 631.2 billion yen.
Regarding manufacturing output, it rebounded for the eighth straight month rising 2.2% by the end of 2009 following an increase by 2.6%. Industrial production rose 5.3% in December from a year earlier.
Moreover, the Bank of Japan expected the uptrend in exports and production to remain alongside better economic conditions in overseas markets, so business investments may rise over the medium term, especially with the better forecasts for corporate earnings.
If capital spending continued to improve, we should see conditions in the labor market getting better, keeping in mind that unemployment fell to 5.1% in December. Household spending will increase as income levels are moving forward, that may help to ease the decline in prices and support the economy to fight deflation that continued to weigh on economic activity.