Japan Core Machinery Orders Grew 0.2% m-o-m in August

Japan Core Machinery Orders Grew 0.2% m-o-m in August
October 13, 2020


The euro dollar declined against the yen on Monday following the report of lower-than-anticipated German wholesale price index data. The unanticipated increase in Japanese core machinery orders also fueled the yen’s rally against the euro. In the past 24 hours, the EUR/JPY pair declined from a high of 124.85 to a low of 123.90.

According to the Cabinet Office of Japan, core machinery orders increased 0.2% m-o-m in August, following a growth of 6.3% in the earlier month. Economists had anticipated a negative growth of 1%. It is the second successive month of expansion, underlining strength in capital expenditures even though uncertainty prevails in the economic activities due to the COVID-19 pandemic.

On a y-o-y basis, core machinery orders, barring ships and power, decreased 15.2% in August, in accordance with economists’ anticipation for a drop of 15.6%.

The aggregate value of machinery orders received by Japan-based 280 manufacturers rose by 19.8% m-o-m in August. Private-sector machinery orders, barring volatile ones such as ships and electric power enterprises, expanded by a seasonally adjusted 0.2% in August.

The slight increase in core orders reflects underlying economic strength, but the forecast for capital outlays continued to remain sluggish as enterprises posted weak earnings.

Furthermore, orders for manufacturers declined 0.6%, while orders for non-manufacturers fell 6.9%. The Japanese government upwardly revised its assessment on machinery orders to indicate a halt to the declining trend.

Notably, last Wednesday, the government had stated that the economy had probably stopped contracting. Such a scenario could be a huge relief for Prime Minister Yoshihide Suga, who had promised to take adequate measures to reinvigorate the economy.

Overseas orders has seen a steep increase since April 2014, surging 49.6% m-o-m following a gain of 13.8% in the earlier month.

The government has set aside $2.20 trillion as a fiscal stimulus to nullify the pandemic’s adverse effects, boosting an existing program from the Bank of Japan. Two more policy meetings are scheduled to occur this year, with the first one planned on October 28-29 and the second one expected in mid-December.

The Bank of Japan also stated that the producer price index declined 0.8% y-o-y in September, following a drop of 0.6% in the earlier month. The reported reading was worse than economists’ estimates calling for a decline of 0.5%. While the export price index increased (constant currency basis) 0.3% m-o-m in September, the import price index (constant currency basis) grew 0.4% from the earlier month.

In a separate news release, the Bank of Japan stated that the lending rate declined slightly to 6.4% y-o-y in September, following an increase of 6.7% in the earlier month.

According to the Japan Machine Tool Builders Association (JMTBA), preliminary machine tool orders declined 15% y-o-y in September, compared with a decline of 23.2% in the earlier month.

In Europe, the German Federal Statistical Office (Destatis) data indicated that the wholesale price index remained unchanged in September, after declining 0.4% in August. Economists had anticipated a 0.2% increase in the wholesale price index for the reported period.

The selling prices (wholesale trade) declined 1.8% y-o-y in September 2020. Likewise, in August and July, selling prices dropped 2.2% and 2.6%, respectively.

The mixed economic data from Europe and Japan are expected to keep the EUR/JPY pair range-bound with a slight bearish bias.

Technically, the EUR/JPY pair is declining after facing resistance at 124.85. The next support is anticipated only near 123.90. The currency pair is trading below its 50-day moving average. Additionally, the momentum indicator is declining. Therefore, we are expecting the EUR/JPY pair to remain in a downtrend in the short-term.

JPY - technical analysis - 13th October 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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