Japan Machine Orders Jump to Highest Since Lehman Sank: Economy

Japan’s machinery orders jumped to 819.3 billion yen ($8.4 billion) in August, the highest since the collapse of Lehman Brothers Holdings Inc. in 2008 and a sign of a strengthening economic revival.

Orders excluding ships and power generation rose 5.4 percent from the previous month, more than double the 2.5 percent median forecast in a Bloomberg News survey of 28 economists. While large bookings can make the numbers volatile, Credit Suisse Group AG. said today’s data confirm an “upward trend” in capital spending.

Prime Minister Shinzo Abe is gambling that the economy’s momentum and 5 trillion yen of extra stimulus will be enough to prevent a sales-tax increase scheduled for April from derailing a recovery driven by the policies called Abenomics. Today’s numbers build on a Tankan report released Oct. 1 that showed confidence among large manufacturers at the highest since the early stages of the global credit crisis in 2007.

“Capital spending is on a recovery trend,” said Minoru Nogimori, an economist at Nomura Securities Co. in Tokyo. “Japan’s economic recovery is looking steady.”

The Cabinet Office raised its assessment of machinery orders, saying they are picking up.

In a note, Barclays Plc. analysts said non-manufacturing companies were leading the recovery in Japan’s capital spending and that key focuses will be on when improvements will spread to manufacturers and when the government will introduce tax breaks for expenditure.

Inflation Goal

The Topix index was up 0.6 percent at 2:50 p.m. in Tokyo, while the yen slipped 0.4 percent to 97.73 per dollar.

After unleashing fiscal and monetary stimulus, Abe’s prospects of achieving a longer-term revival may depend on companies raising wages and boosting investment, rather than sitting on piles of cash.

Nogimori said that weakness in the yen may help to offset the blow to the Japanese economy from next year’s sales-tax increase, by supporting the nation’s exporters. “As long as exports hold steady, companies may continue to spend.”

The International Monetary Fund said this week that the Bank of Japan is likely to reach its 2 percent inflation goal later than a targeted two years. Excluding the effect of the sales-tax increase, inflation “is projected to move up only very gradually, reaching the 2 percent target sometime in 2016–17,” the IMF said in a report.

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