9 December 2002, 10:28  Japan's Oct. Machinery Orders Fall More Than Expected

Tokyo, Dec. 9 (Bloomberg) -- Japanese machinery orders, an early indicator of business investment, fell more than expected in October as slumping exports prompted companies such as TDK Corp. to cut back. Machinery orders fell 4.1 percent from September, seasonally adjusted, government figures showed. Orders had been expected to fall 3.5 percent, according to the median forecast of 26 economists in a Bloomberg News survey. Orders rose 12.7 percent in September. The slide in exports, which fell in four of the past five months, is prompting companies to cut spending on new machines and equipment to preserve profits. That's likely to crimp growth in the world's second-largest economy, which has been through three recessions in a decade. ``Corporate profits were better than expected this year, but very little of that is translating into new investments,'' said Takanobu Igarashi, chief economist at UFJ Institute. ``We may be back into recession next year around this time, because companies didn't sufficiently increase spending now.'' From a year earlier, machinery orders rose 1.9 percent in October. The report excludes shipping and utilities companies, which tend to skew the results. The No. 244 bond, which carries a 1 percent coupon and matures in 2012, rose 0.091 to 99.909 as of 3:57 p.m. Its yield fell 1 basis point to 1.010 percent. A basis point is a hundredth of a percentage point. The Nikkei 225 Stock Average fell 0.4 percent to 8828.05 as of the 3 p.m. close of trading in Tokyo.
Leading Index
TDK, Japan's biggest maker of magnetic parts for disk drives, illustrates the reluctance to spend. The Tokyo-based manufacturer cut capital investment by 62 percent in the six months ended Sept. 30 and slashed 3,700 jobs in the same period. Job cuts helped group net income more than double to 4.65 billion yen ($38 million.) Japan may already be headed for another recession. Japan's monthly index of leading economic indicators last week signaled a contraction for the first time in 10 months. The index measures job offers, consumer confidence, and other indicators of economic performance in six months. Economic growth slowed to 0.8 percent in the July through September period from 0.9 percent in the second quarter, revised figures showed today. Export growth, which accounted for half of the second-quarter economic expansion, slowed to a gain of 0.6 percent in the third quarter from 5.9 percent.
Job Cuts
The slide in overseas shipments is rippling through the economy as companies curb investment and fire workers. Capital investment fell 0.5 percent in the third quarter after rising 0.3 percent in the second. The slowdown is continuing this quarter. Industrial production fell 0.3 percent in October from September, and the jobless rate rose to 5.5 percent, matching December's record, from 5.4 percent in September. That's hurting consumer spending, which accounts for more than half the economy. ``It's not possible to hope for a sustained recovery in consumer spending anytime soon,'' said Minako Iida, an economist at Deutsche Securities Ltd. ``It's likely that the economy will return to recession, possibly in this or the next quarter.'' Advantest Corp., the biggest maker of memory-chip testing machines, will cut 600 jobs in hopes of saving 10 billion yen ($81 million) annually in labor costs. Sanyo Electric Co., the world's biggest maker of mobile-phone batteries, said it would cut wages by as much as a third in home appliance manufacturing and transfer about 1,400 workers in the division to other units. In a sign of faltering consumer demand this quarter, Japanese household spending declined 2.3 percent in October, seasonally adjusted, following a 5.4 percent increase in September, a government report said last week. //www.quote.bloomberg.com

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