Japanese machinery orders hit record low
TOKYO: Japanese machinery orders have fallen to the lowest level on record and thousands of firms have gone bankrupt, data has shown, dampening hopes of a quick recovery in Asia's biggest economy.
Companies are slashing their investment to try to survive a global economic downturn that has pushed Japan into its worst recession since World War II.
Core machinery orders showed a surprise fall of 3.0 percent in May from the previous month, to 668.2 billion yen (7.1 billion dollars), the lowest level since comparable records began in 1987, the government said.
The orders, a closely watched gauge of planned business investment, have fallen for three straight months, dashing market hopes of a rebound in May.
The data threw cold water over the prospects for a swift Japanese economic recovery, said Naoki Murakami, chief economist at Monex Securities.
"It reminds us of the risk that the pace of economic recovery may be very slow due to cutbacks in domestic capital spending by non-manufacturing and other companies," he said in a report.
Core orders, which exclude volatile demand from power firms and for ships, are expected to fall 5.0 percent in the three months to June from the previous quarter, the government said.
"Capital investment is likely to stay weak for some time," warned Credit Suisse economist Satoru Ogasawara.
In June 1,422 firms went bankrupt in Japan with debts of 10 million yen or more, up 18.2 percent from May and the highest level for the month since June 2002, according to a survey released Wednesday.
For the first half of 2009, corporate failures totalled 8,169, the most for the January-June period in six years, according to the survey by Tokyo Shoko Research.
"The government has declared the economy hit bottom but company failures do not show it," said Masashi Seki, an official at the research firm.
Before the current downturn began, Japan's corporate sector had been a key driver of a recovery in the world's second largest economy following the recessions of the 1990s.
But major Japanese companies plan to trim their investment in factories and equipment by 9.4 percent on average for the current fiscal year to March, the Bank of Japan's "Tankan" survey showed last week.
Another report released Wednesday highlighted the tough trade environment, with Japan's current account surplus shrinking a sharper-than-expected 34.3 percent in May from a year earlier to 1.30 trillion yen.
The current account, the broadest measure of trade with the rest of the world, worsened for a 15th straight month compared with a year earlier. Market forecasts had been for a surplus of 1.47 trillion yen.
Japan entered recession in the second quarter of 2008 as its heavy reliance on overseas markets as an engine of economic growth left it vulnerable to the fallout from the global economic crisis.
Gross domestic product shrank at an annualised pace of 14.2 percent in the first quarter of 2009, the worst performance on record.
While hopes are mounting that the economy has come through the worst of its export and production slump, experts say there is a risk that a fledgling recovery will stall once the effect of government stimulus spending fades.
Tokyo has unveiled a series of stimulus packages, including cash handouts for households and incentives to buy fuel-efficient cars.