Page last updated at 06:20 GMT, Wednesday, 8 July 2009 07:20 UK

Japan machinery orders at new low

Cranes and containers at Yokohama, Japan (30/03/2009)
Japanese firms are reluctant to invest in new machinery

Japanese machinery orders dropped unexpectedly in May to a record low, figures show, with firms limiting their spending as the economy remained weak.

Core private sector machine orders, viewed as a key indicator of capital spending, fell 3% from April to 668.2bn yen ($7.1bn; £4.4bn).

May's drop is less than the 5.8% fall seen in April, but in sharp contrast to the 2% rise analysts had forecast.

Machine orders for mining firms and steel manufacturers were hit hard.

"Capital spending will not stop falling until the final quarter of this year," said Azusa Kato, an economist at BNP Paribas.

"Orders from non-manufacturers were weak, reflecting concerns over domestic demand. For manufacturers perhaps the worst is over, but exports are unlikely to recover quickly as they did in the previous boom," he added.

Many analysts now think the central bank could take steps to boost corporate borrowing in the months ahead.

The latest figure is the lowest on record for comparable data, dating back to April 1987, according to the Cabinet Office.

The data suggests firms are reluctant to invest in new machinery while economic uncertainty remains and world demand for Japanese goods has fallen.

Japan, which is heavily reliant on exports, has been hard hit by the global downturn.

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