Japan machinery orders likely to drop but economic growth se

Bareksa.com - Japan's leading indicator of capital spending is expected to fall in April after a record jump the previous month, a Reuters poll showed, but analysts see a moderate recovery in corporate spending supported by positive earnings.

The world's third-largest economy will likely post a current account surplus for the third straight month in April, helped by a slowdown in imports from weaker demand after a sales tax increase.

In other key data, revised growth figures will probably confirm the economy maintained a healthy recovery momentum boosted by strong consumer spending and business investment.

The data next week will likely underscore views that the economy remained solid and was able to withstand the effects of an increase in the national sales tax to 8 percent from 5
percent on April 1.

"Firms' capital spending continues to recover because their business results are improving," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"The effect from the tax hike may exaggerate the data till around summer and such effects will likely wane after that."

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, probably fell 11.9 percent in April from the previous month, a Reuters survey of 27 economists showed.

That would follow a record 19.1 percent month-on-month jump in March.

Compared with a year earlier, core orders likely gained 13.2 percent in April after a 16.1 percent rise the previous month, according to the survey.

The Cabinet Office will release the data on June 12 at 8:50 a.m. (June 11 at 2350 GMT).

On Monday, Japan is due to publish data on the current account balance, which is expected to show a larger surplus of 322.5 billion yen ($3.15 billion) in April from 116.4 billion yen the previous month.

The economy likely grew an annualised 5.6 percent in January-March, slightly down from a preliminary 5.9 percent as a component of capital spending probably grew at a slower pace than initially thought.

Capital expenditure is expected to have grown 4.6 percent for the quarter from a preliminary 4.9 percent increase. 

The government will release revised GDP data at 0850 a.m on Monday, the same time that the current account balance is published.

"There will no change to a picture that the economy grew sharply led by a surge in consumer spending due to rushed demand before the tax hike and capital expenditure, while external demand weighed," Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute said in his report.

The corporate goods price index, which measures the price companies charge each other for their goods, likely increased an annual 4.1 percent in May, unchanged from April, the poll showed. The data will be released on Wednesday. 

Analysts see the economy rebounding in the third quarter after a temporary pullback in the current quarter due to the dampening effect from the sale tax hike.

Bank of Japan Governor Haruhiko Kuroda has repeatedly voiced confidence that the nation can achieve the central bank's inflation target of 2 percent during the next fiscal year beginning in April 2015. This led some analysts and markets to scale back expectations of additional near-term monetary easing. (Source : Reuters)