Japan News:

https://www.yahoo.com/finance/news/japans-exports-machinery-orders-seen-102711265.html

Article:

TOKYO (Reuters) - Japan's exports likely fell for a 14th straight month while machinery orders are expected to have dropped at the fastest pace in over a year, a Reuters poll showed on Friday, as activity in the world's third-largest economy slows.

While both trade and machinery order data due next week likely predate the significant worsening of the coronavirus seen in January, the outbreak is expected to add to existing challenges for the country's export and factory sectors.

Comments:

The drop in exports is not unexpected as the global economy is, most likely right now, in an adjustment phase meaning, like the business cycle, it is trying to normalize as to how much global economy activity is the "new normal" now. The idea of 14 straight months is very similar to South Korea, which is also in the same situation with exports.

The decrease in machinery orders is always ambiguous in that, not all companies who need new machinery order new machinery at the same time. There is always the possibility that some companies, don't need new machinery at the moment, and as such the news becomes a little skewed in that, just because there was a decrease in machinery orders, might not mean companies are feeling bleak about the economy, its quite possible, they just don't need new machinery at this moment. But at the same time, there is always the possibility, because of weak business sentiment, they are delaying the buying of new machinery.

Article:

Exports are expected to have fallen 6.9% in January from a year earlier, after a 6.3% decline in December, the poll of 17 economists found.

Imports likely slipped 1.3% last month, resulting in a trade deficit of 1.69 trillion yen ($15.44 billion), the poll showed, after a revised to 154.6 billion yen gap in December.

Analysts say the expected drops in exports last month were partly due to China's Lunar New Year holidays and that the hit from the coronavirus outbreak will likely appear in February exports data.

"Previously, we expected exports would pick up gradually as there were signs of recovery in semiconductor manufacturing equipment  and electronic components," said Kenta Maruyama, economist at Mitsubishi UFJ Research and Consulting.

"The timing of the recovery in exports is likely delayed to the middle of this year."

Comments:

Decreasing exports was/is not unexpected in Japan, as the global economy, as stated above, is trying to figure out how much global activity is the "new normal".  The long Chinese New Year, always brings less economic activity, so that is nothing new or nothing unexpected, if things were normal.

Of course things maybe are not even the "new normal", as with the now "virus new normal" which might be in play for a significant amount of time.

Signs of recovery in the semiconductor market and electronics components markets were also in South Korea, but now the "virus new normal" may cause some concern in those areas too.

As to when will there be an actual recovery? A new definition of recovery might be needed if the "virus new normal" continues.

Article:

He said the virus outbreak is expected to weigh on trade through factory output in China, global chain disruptions and stalled logistics.

Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine month, likely dropped 9.0% in December from the previous month, the poll showed.

It would be the fastest decline since September 2018 when a severe earthquake and typhoons disrupted business activity.

Analysts say the expected falls in core machinery orders in December is partly due to a reactionary fall after they posted record monthly growth of 18% in November.

Comments:

Yes the "virus new normal" most likely is going to disrupt supply chains and logistics for the time being. Quite possibly new supply chains might need to be established to maintain normal business and economic activity.

Core machinery orders, while an important economic indicator, should be taken with some "some grain of salt", meaning it can be a little ambiguous from time to time as to what is the real meaning of a decrease in machine orders. Meaning again, not all companies buy new machines at the exact same time. But of course there is probably a minimum level of machine orders that, whomever, always look for to check for vitality or sound economic activity in an economy.

As can be seen an 18% increase in November meaning, quite possibly, a lot of machinery purchases in November and less company buying in December.

Article:

"Also, uncertainty for the outlook such impact from a sales tax hike remains strong and companies kept their cautious stance on business investment," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.

The publish machinery orders and trade data are both published on Wednesday.

The poll also found the core consumer price index, which includes oil products but excludes volatile fresh food costs, likely rose 0.8% in January from a year earlier, led by gains in energy costs, ticking up from 0.7% in December.

Comments:

There always seems to be some uncertainty in any economy these, but even more so in Japan. As there is always some who think the Japanese economy is not sound or not headed in the right direction. But it keeps going, or has been up until the last situation, meaning the "virus new normal".

Companies by nature always seem to be cautious as they try to wait out or figure out when Japanese consumer spending gets back to normal. But things are not the regular "new normal" as everyone is in the "virus new normal" so companies are looking at Japanese consumer spending with a new perspective as to how much the virus situation is now going to affect "normal" consumer spending, not to mention the decrease in foreign tourism spending.

The consumer price index, while a measure of overall prices in an economy, is not  always a good measure the normal family normal consumers, families or individuals. Indexes are good for looking at general trends in an economy but they are not always good for "real world" indications because not everyone buys the same products. Yes there is a basket of products that are measured regarding increases or decreases in prices sometimes the "real affect' of changes in consumer prices are not always known in an economy.

 

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