TOKYO, Jan 14 - Japanese machinery orders fell in November from a month earlier, data showed on Wednesday, but the slip was expected after the previous month's surge and economists said an export-led recovery was still intact. Japan's core private-sector machinery orders, a key gauge of trends in capital spending, fell 7.8 percent in November from a month earlier on a seasonally adjusted basis. That was in line with a median forecast for a seven percent drop in a poll of 26 economists last week, and follows a 17.4 percent jump in October. "Given the more than 17 percent rise in October, a 7.8 percent fall can be regarded as a sign that Japan's recovery is continuing," said Hidenori Suezawa, chief strategist at Daiwa Securities SMBC. Compared with the same month last year, orders rose 13.4 percent, also in line with the poll forecast. Core orders, which exclude those for ships and equipment at electric power firms, are regarded as an indicator of capital spending in the coming six to nine months. But the data tends to be volatile, and most economists said they agreed with the government's assessment that machinery orders were still in a recovery phase. Japan's economy has been recovering over the past year on the back of robust exports and manufacturing. A sector-by-sector breakdown showed machinery orders fell 1.7 percent in general equipment after a 20.6 percent rise in October. Orders in the iron and steel sector fell 64.1 percent in November after a 46.8 percent surge the previous month.
Hitoshi Asaoka, an economist at Mitsubishi Research Institute, focused on a 4.8 percent rise in orders in the communications sector and a 9.5 percent rise in the wholesale and retail sector. "It's encouraging that the communications and wholesale/retail sectors --- often seen as the most sensitive to the economy --- saw their orders increase for a second straight month," he said. "I think it's too early to conclude that the momentum in corporate spending is over." But some pointed to the yen's recent strength as a worrying factor in the months ahead. "The economy is still on a steady recovery track. However, one element that still needs careful monitoring is the impact from the recent strong yen," said Soichi Okuda, a senior economist at Sumitomo Corp.
DOMESTIC DEMAND LAGS
Weak domestic demand is also a concern for Japan's economy. Data announced earlier on Wednesday showed Japan's current account surplus soared in November, but the rise was mostly due to a slump in imports. The current account, the broadest measure of trade in goods and services, climbed 33.8 percent from a year earlier to 1.4965 trillion yen ($14.08 billion), the Ministry of Finance said. That was higher than a median forecast of about 1.3 trillion yen in a poll. Exports fell 1.8 percent but imports slumped by 5.4 percent, boosting the trade surplus by 9.4 percent to 1.1567 trillion yen. Economists warned against reading too much into the fall in exports since the comparison appeared to have been distorted by a big increase in the same month a year earlier following the end of a strike at U.S. ports. Most said they expect the trade surplus to keep growing in the months ahead as domestic demand remains stagnant, lagging a rise in exports. "The U.S. economy is still looking pretty strong and demand from the rest of Asia should be quite firm as well, so the trade surplus should stay as it is for a while," said Seiji Adachi, AN economist at Credit Suisse First Boston Securities. "Imports should eventually rise as the Japanese economy recovers, but that is going to take more time." Some said the value of imports would jump in the months ahead due to a rise in oil prices, but that the impact on the overall trade balance should be offset by a strong yen. Glen Hubbard, a former chairman of the White House Council of Economic Advisers who was in Tokyo for a government-sponsored seminar on economic policy, gave a cautious assessment. "Japan's economy, the second-largest in the world, is entering a recovery phase," he said. "But there are many concerns, such as low nominal growth." ($1=106.22 yen)//