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Japan machinery orders rise on earthquake rebuilding

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Published : Aug. 11, 2011 - 19:17

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Japan’s machinery orders rose for a second month in June as companies increased spending to restore businesses and production disrupted by the March 11 earthquake and tsunami.

Factory orders, an indicator of capital spending in three to six months, rose 7.7 percent in June from May, the Cabinet Office said Thursday in Tokyo. The median forecast of 27 economists surveyed by Bloomberg News was for a 1.7 percent increase.

The report follows production and export data suggesting that the corporate sector has been recovering faster than expected from the March disaster. Now, the nation’s recovery is at risk as stocks plunge and a yen near a postwar high threatens exporters’ profits.

“Companies have been pretty optimistic about their spending plans and more people are confident that the post-quake slump will be short-lived,” Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo, said before the report. “Demand to restore factories damaged by the disaster is also a significant factor supporting demand.”

Toshiba Corp., the world’s largest maker of flash memory chips, is among companies counting on reconstruction demand to boost business later this year. The company posted 470 million yen ($6 million) in net income in the three months ended June 30, exceeding analysts’ estimates.

Fumio Muraoka, corporate senior executive vice president at Toshiba, told reporters on May 9 that the company expects to benefit from demand for televisions, refrigerators, and air conditioners in the current fiscal year as the nation rebuilds.

The yen has climbed more than 4 percent against the dollar in the past month and Wednesday breached the 76.97 per dollar level it strengthened to on Aug. 4 when authorities intervened. It is also stronger than the 82.59 average rate companies have based their profit forecasts on, in a quarterly Bank of Japan survey of business activity.

“The exchange rate is at a level that has an extremely damaging effect on the Japanese economy,” Osamu Masuko, president of Tokyo-based Mitsubishi Motors Corp., said last week. 

(Bloomberg)