WSJ details:
Japanese core machinery orders fell 3.7% in January after unusually strong growth in the previous month, the government said Wednesday, suggesting a full-fledged recovery in business investment is still some way off.The below chart details the past 20 years of Japanese machinery order data in an attempt to avoid the short-term noise (while down in January, machinery orders were up more than 20% in December).
The findings suggest it may take more time before Japan's capital investment—which accounts for 15% of gross domestic product and is a pillar of domestic demand—starts recovering steadily and strongly. Core orders are considered a reliable gauge of future capital investment, and exclude often-volatile orders for ships and those from electronic power companies. The machinery orders were down 1.1% in January from the previous year.
Still, January's decline may be too moderate to dispel the view that demand for machinery is stabilizing. Previous data show core orders gained 0.5% on quarter in October-December for the first rise in seven quarters, and there are signs that the improvement in exports—a key incentive for manufacturers to invest—is gaining steam.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj-E8b6JlmmcdIJKEAlo3qRxo3SPzSSKZuuKSYbThhfPJ6WHITKe0ccMvz-i6kXbIIKySN3gOd6ABhzgwVmn4JuWEoG7XWEb5HXcI6CbLtzu3jzaLdRBoG-BkN1tWyaHkUyma6X-ITe7g/s800/japan.png)
As indicated above, Japan has successfully relied heavily on exports in the past (at the beginning of last decade) to get their economy out of what was a more than a decade long period of slow / no growth. After peaking in mid-2007, the rug was taken out from under them when the continued lack of internal demand was met by a crash in external demand.
The key question is can the Japanese economy do it again? Business Week details news out of China, that on the margin, suggests they might:
China’s trade surplus shrank to the lowest level in a year in February as a surge in imports signaled the nation may start to outshine the U.S. as a destination for the world’s goods.While the bulk of these imports are in the form of commodities, China is increasing their demand for "value-add" goods on the margin. If they (and other emerging Asian countries) continue to do so, Japan may have a shot...
Imports rose a more-than-estimated 44.7 percent from a year ago, the customs bureau reported on its Web site today. The surplus was $7.61 billion, and exports gained 45.7 percent.
Source: ESRI
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