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Japan machinery orders increase 4.2 percent

Japan’s machinery orders rose more than economists expected in January, signaling that companies will boost spending as economic recoveries abroad strengthen.

Factory orders increased 4.2 percent from December, when they rose 1.7 percent, the Cabinet Office said Wednesday in Tokyo. Orders, an indicator of capital spending in three to six months, were projected to climb 3 percent, according to the median forecast of 28 economists surveyed by Bloomberg News.

Companies from Asahi Glass Co. to Nippon Power Graphite Co. have unveiled investment plans as global growth accelerates. The additional spending will help sustain Japan’s recovery from the fourth-quarter contraction in gross domestic product, according to economist Hiroshi Miyazaki.

“With the pickup in production, manufacturers are getting ready to produce more,” Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo, said before the report. “The investment recovery is likely to continue, albeit gradually.”

Japan’s stocks have advanced in recent weeks on evidence of an acceleration in the world economy. The Nikkei 225 Stock Average jumped 3.8 percent last month and was up 0.9 percent at 9:11 a.m. in Tokyo.

The Cabinet Office Thursday will probably say the world’s third-largest economy shrank at a revised annual pace of 1.2 percent in the fourth quarter, according to the median estimate of 16 economists surveyed by Bloomberg. The preliminary report on the gross domestic product released Feb. 14 showed the 1.1 percent contraction was driven by a slowdown in exports.

That demand may be coming back. China’s imports soared 51 percent in February from a year before, while the jobless rate in the U.S. unexpectedly slid to the lowest level in almost two years. China and the U.S. are Japan’s two largest markets.

Japan’s government raised its assessment of the economy for a second straight month in February, saying the nation is emerging from “a recent pause” as production and exports gain pace. Factory output rose for a third month in January and companies plan to boost output in February and March, setting the stage for the first advance in production in three quarters.

Those brighter signs are boosting confidence in the economy, making it likely that machinery orders will continue to rebound, Nomura Securities Co. said in a report last week.

Nippon Power Graphite, a joint venture between Sumitomo Corp. and Nippon Coke and Engineering Co., said Feb. 28 it will spend 1 billion yen for a plant to make materials used in lithium-ion batteries. The plant, in Fukuoka, southern Japan, will triple the venture’s production capacity to 1,000 metric tons, the company said. (Bloomberg)



New furnace



Asahi Glass said Feb. 9 it will invest 20 billion yen in a new furnace in Hyogo to meet booming demand for mobile devices. The glassmaker expects net income to rise 5.5 percent this year.

At the same time, a 9 percent advance in the yen against the dollar in the past year has given companies an incentive to move production outside of Japan. Michijiro Kikawa, chief executive officer at Hitachi Construction Machinery Co., said his company plans to procure more of its components abroad to protect its profits from currency swings.

“Until now we’ve followed a concept that key components are developed and produced in Japan and they are supplied globally,” he said in a Feb. 23 interview. “We won’t necessarily stick to Japan” for less important parts, he said. 

(Bloomberg)
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