November Machinery Orders

◆According to statistics for machinery orders in November 2015, the leading indicator for domestic capex, private sector demand (excluding shipbuilding and electrical power), orders declined for the first time in three months at -14.4% m/m, while falling below market consensus at -7.3%. November results represent a reactionary decline after the major gains achieved during the months of September and October 2015.

◆Looking at orders by source of demand in November, the manufacturing industries suffered declines for the first time in two months at -10.2% m/m. This is thought to be a reactionary decline after the major growth experienced in October (+14.5%). According to the 3-month moving average, though results were low, figures remained within the range of marking time. Meanwhile, non-manufacturing orders (excluding shipbuilding and electric power) declined for the first time in three months at -18.0% m/m.

◆Machinery orders are expected to continue marking time in the near future. According to the December BOJ Tankan, manufacturers are cautious in regard to capex, while non-manufacturing maintains a healthy attitude toward capital investment. With favorable domestic demand, the non-manufacturing industries are expected to carry out investment in energy saving and labor saving as a means of dealing with the shortage of manpower. On the other hand, fears of another economic slowdown in China have flared up again, causing some worries. If the sense of uncertainty regarding the future of the world economy grows stronger, corporations could become even more cautious in regard to capex spending, especially amongst export driven manufacturers.