September Machinery Orders

◆According to statistics for machinery orders in September 2014, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electric power), were up by +2.9% m/m, while exceeding market consensus (-1.0%). This is the fourth consecutive month of growth, indicating that orders are now clearly in a growth trend.

◆Looking at results by source of demand, the manufacturing industries achieved growth for the first time in two months at +12.0% m/m. A wide range of industries reported growth in orders, showing good results overall. Non-manufacturing orders (excluding shipbuilding and electric power) achieved growth for the second consecutive month at +1.7% m/m.

◆Overseas demand suffered a decline of -9.4% m/m. This appears to be in reaction to the major growth experienced during the Apr-Jun quarter, but is still on the positive side in comparison to earlier declines.

◆According to the CAO outlook for the Oct-Dec 2014 period, private sector demand (excluding shipbuilding and electric power) is expected to suffer a decline of -0.3% q/q, its first decline in two quarters. Corporations are a bit bearish in their outlooks for orders, creating a somewhat negative tone. Domestic demand has been weaker than expected after the increase in the consumption tax, and this increasing sense of an unclear future is likely to show up in corporate outlooks. Hence care should be taken regarding the future.