Japanese Machinery Orders Tumble 9.3% as Recovery Weakens

Japanese machinery orders fell more than economists forecast in July as declining profits forced companies to limit investment even amid signs overseas markets are recovering.

Orders, an indicator of capital spending in the next three to six months, declined 9.3 percent from June, when they jumped 9.7 percent, the Cabinet Office said today in Tokyo. Economists surveyed by Bloomberg News projected a 3.5 percent decline.

Companies including Toyota Motor Corp. are cutting costs to limit losses even after a rebound in demand helped Japan climb out of its worst postwar recession last quarter. More than a third of the country’s factory capacity is sitting idle, leaving little need for investment in plant and equipment, spending that last year made up 15 percent of the economy.

“There’s been an enormous wave of confidence in the stock markets but that hasn’t been shared by business leaders,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. “Producers know that lots of the improvement in exports and in the overall outlook has been on the back of government programs and they’re still troubled by the outlook.”

More than $2 trillion in emergency spending by governments worldwide has fueled a global economic revival. China, Japan’s biggest export market, expanded 7.9 percent last quarter from a year earlier, while the U.S. shrank an annualized 1 percent, its best performance since the second quarter of 2008.

GDP Growth

Japan’s gross domestic product grew at a 3.7 percent annual rate last quarter, buoyed by exports and a stimulus package that spurred consumer spending on cars and electronics. Revised figures are due tomorrow.

Economists don’t expect the rebound to last as the effects of the stimulus packages fade, forcing the Democratic Party of Japan, which won national elections on Aug. 30, to contend with a weakening economy.