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Japanese Machinery Orders Unexpectedly Drops, Dims Outlook for Recovery

By David Liu
12 June 2011 00:35 GMT

Japanese April machine orders was widely expected to beat the previous month’s data as large sums of government spending targeted towards heavy industries affected by the March 2011 Tohoku Earthquake would have led to greater spending. However, a cooling US economy and production disruptions may prove to be a drag on the weakened Japanese economy.

EVENT

ACT

EXP

PREV

Machine Orders APR (MoM)

-3.3%

1.7%

1.0%

Machine Orders APR (YoY)

-0.2%

4.9%

9.1%

The month-to-month decline of 3.3% was the lowest on record since September 2010. The year-over-year data providing a wider scope of the health of the Japanese economy grew at its slowest pace since December 2010. However, the trend of the longer term measure does confirm a slowdown in Japan’s economic health despite premature signs of recovery in the early months of 2010.

Japanese_Machinery_Orders_Unexpectedly_Drops_body_Picture_3.png, Japanese Machinery Orders Unexpectedly Drops, Dims Outlook for Recovery

Japanese Machine Orders (YoY). Chart generated with Bloomberg LP Professional Terminal.

Despite a move to risk aversion on concerns that the data indicates a larger global slowdown, the yen erased its gains against the US dollar at the Asian market open. This may be an indication of investors continuing to price in the end of QEII and the upward trend of US debt yields as the Federal Reserve halts bond purchases. However, the reduced outlook for the Japanese and world economies caused a dramatic 1.20% gap down on the benchmark Nikkei 225 index at the start of Asian trading.

Japanese_Machinery_Orders_Unexpectedly_Drops_body_Picture_5.png, Japanese Machinery Orders Unexpectedly Drops, Dims Outlook for Recovery

USDJPY 1 Minute Chart. Vertical line indicates data release. Chart generated with FXCM Strategy Trader.

Japanese_Machinery_Orders_Unexpectedly_Drops_body_Picture_4.png, Japanese Machinery Orders Unexpectedly Drops, Dims Outlook for Recovery

Nikkei 225 5 minute chart. Vertical line indicates market open. Chart generated with FXCM Strategy Trader.

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12 June 2011 00:35 GMT