Tokyo, April 9 (Bloomberg) -- Japanese machinery orders, an early indicator of business investment, fell almost twice as much as expected in February, snapping two months of gains. Private machinery orders, excluding those received by shipping and utility companies, fell a seasonally adjusted 9.6 percent from January, the Cabinet Office said. Economists had expected a 5 percent drop, according to the median of 28 forecasts in a Bloomberg News survey. Companies such as Tokyo Electron Ltd., the world's No. 2 supplier of chip-making equipment, are struggling as the war in Iraq hurts exports and consumer confidence. A drop in business investment, which accounted for about half of Japan's 0.5 percent growth in the fourth quarter, may shorten a recovery from its third recession in a decade. ``We're worried about consumer confidence cooling as a result of the war, because that could directly affect businesses' investment plans,'' said Yasunari Shiino, spokesman at Tokyo Electron.
The Iraq war, which broke out last month, threatens to hurt exports to the U.S., Japan's biggest export market. Economists sliced their forecasts for growth in the world's biggest economy this year to 2.4 percent from 2.6 percent, according to a report released yesterday by Blue Chip Economic Indicators. ``As far as March is concerned, given the situation in Iraq, there could have been some cancellations,'' said Yoshihiko Senoo, head of research at Japan's Economic and Social Research Institute, which released the report.
Shares Fall
Japanese share prices extended declines after the report. The Nikkei 225 Stock Average fell 0.9 percent to 8057.61 at the 3 p.m. close of trading in Tokyo, led by companies such as Kyocera Corp. The world's largest maker of ceramic packaging used to protect finished microchips gets more than half its sales from abroad. Tokyo Electron last week said its group net loss for the year ended March 31 probably more than doubled from a year earlier to 41 billion yen ($342 million). It said it plans to cut an additional 1,000 jobs this year to cope with lower spending on new plants and equipment from customers, which include Toshiba Corp. and NEC Corp., Japan's two biggest chipmakers. Japan's central bank left its monthly evaluation of the world's No. 2 economy unchanged for a fifth month today as worries about the Iraq war and the spread of a deadly virus in Asia countered rising investment by companies.
Tankan Survey
``Economic activity remains flat as a whole despite some signs of improvement, with greater uncertainty about the economic outlook partly due to Iraq-related developments,'' the Bank of Japan said in its monthly report. Machinery orders fell to 842.1 billion yen ($7 billion), seasonally adjusted, from January. Orders by manufacturers fell 9.1 percent, and orders by non-manufacturers fell 9.8 percent. The Bank of Japan's quarterly Tankan business survey last week showed that manufacturers will increase spending by 2.9 percent in the business year ending April 2004, the first increase in three years. Those plans may be scaled back as a 28 percent slide in the Nikkei 225 Stock Average last business year cuts earnings at NEC, Matsushita Electric Industrial Co. and other companies. Matsushita Electric, the world's largest consumer- electronics maker, said Monday that falling share prices in the year ended March 31 had cut the value of if its investments, contributing to a net loss of 23.5 billion yen. From a year earlier, machinery orders rose 1.4 percent, today's report showed. Orders for ships and equipment for utilities aren't included in the machinery report because their size tends to skew the results. //www.bloomberg.com