Japan January Core Machinery Orders Drop by 1.7%, Surpassing Forecasts

In January, Japan's core machinery orders experienced a decline that surpassed economists' expectations, according to government data. The orders, which are a key indicator of capital spending over the next six to nine months, fell by 1.7% from the previous month, exceeding the forecasted 1.0% drop cited in a Reuters poll. When compared on a year-on-year basis, the orders showed a decrease of 10.9%, which was slightly less than the anticipated 11.2% decline.

This unexpected drop prompted the Japanese government to revise its assessment of machinery orders for the first time in more than a year, describing the situation as "showing some weakness" rather than merely "stalling". This change reflects growing concern about the pace of recovery for the world's fourth-largest economy, which has been impacted by a weak manufacturing sector.

Despite the disappointing machinery orders data, the Bank of Japan (BOJ) is scheduled to conduct its two-day monetary policy meeting, with the data not expected to influence the central bank's decision-making immediately. The BOJ is also contemplating a potential interest rate hike, moving away from negative rates and yield curve control, although such a decision may have significant implications for the Japanese yen.