TOKYO, May 13 - Orders for new machinery at Japanese firms posted an unexpected rebound in March, but companies expected falls ahead for the key gauge of capital spending as the once bright export outlook darkens. The Cabinet Office said on Tuesday that core private-sector machinery orders, which exclude those for ships and equipment, rose 3.8 percent in March from a month earlier on a seasonally adjusted basis. That compared with a median forecast for a drop of 3.6 percent in a poll of 20 economists last week and a fall of 6.8 percent in February.
Looking ahead, though, companies forecast that orders would tumble a record 10.5 percent in the April-June quarter from the previous three months, underscoring concerns that export strength -- a rare bright spot for the stagnant economy -- is fading. "It probably reflected strong concerns about the export environment and uncertainty over the U.S. economic outlook," said Yoshihiko Senoo, head of statistics at the Cabinet Office's research arm. He added that concerns about the impact of the SARS virus were not reflected in the data because the figures were collected by the end of March, before the disease became a major economic worry. Economists said the weak forecast was a worrying sign that the economy could be losing what little steam it has.
"The April-June forecast is suggesting a slowdown across the board. Although the March figures are up a little bit, I would prefer trusting the forecast at this point, given all the uncertainties," said Toshikimi Kaneki, an economist at Sumitomo Trust and Banking.
CAUTIOUS ABOUT OUTLOOK
The ministry left its assessment of capital spending unchanged, saying there were signs of recovery but that caution was needed because of the poor April-June forecast outlook. "We cannot give an assessment for the outlook now...We will have to take a look at the actual numbers," Senoo said, adding that concerns about the war in Iraq, which began in March, likely had a large impact on the forecast. Steady corporate profits resulting from a recent rise in exports and cost-cutting efforts have supported capital expenditure, but firms have mainly been replacing existing facilities rather than expanding them.
Murata Manufacturing Co <6981.OS>, a major cellphone components maker, said on Monday its consolidated capital expenditure for the year that started in April would be 34 billion yen ($290.6 million), roughly unchanged from the previous year. The core orders, which exclude those for ships and equipment at electric power firms, are regarded as a leading indicator of capital spending about six to nine months in the future, although the data tends to be volatile. Capital spending, on a gross domestic product (GDP) basis, as well as personal consumption, is expected to have buoyed the economy in the January-March quarter as exports stalled. The government will release preliminary GDP data for the January-March period on Friday, with a poll showing economists expect real GDP to come in flat for the quarter. The economy grew a real 0.5 percent in the October-December quarter, extending a tentative recovery from its worst post-war recession in 2001. ($1=117.00 yen)//