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Japan’s machinery orders fell into contraction in January as a revision to December’s reading more than halved the previous month’s rate of growth.

The often volatile proxy for corporate Japan’s willingness to invest recorded a month-on-month fall of 3.2 per cent in January, down from a revised December reading of 2.1 per cent growth (previously 6.7 per cent). A median forecast from economists surveyed by Reuters had predicted a rise of 0.5 per cent.

The year-on-year rate fell 8.2 per cent in January after a rise of 6.7 per cent a month prior and coming in well below expectations of a 3.3 per cent drop.

Marcel Thieliant, senior Japan economist at Capital Economics, cautioned against reading too much into the latest data, noting that machinery orders’ “link with business investment has been poor lately.” He added:

Admittedly, capital goods shipments have rebounded lately and suggest that business investment will continue to recover this quarter. However, a rapid recovery in capital spending looks unlikely. According to the Shoko Chukin survey, capacity usage among small firms has been broadly unchanged since the sales tax hike. The broader Tankan survey also suggests that capacity shortages have not intensified lately.

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