Japan machinery orders down 11% in November

Machinery orders were forecasted to rise slightly for the month of November, they didn't. Instead they went down a little over 11%. You can see the information here if you really want to: TABLE-Japan Nov core machinery orders.

They sky is falling. The sky is falling.

Okay, actually, I'm not really sure what this means so let's look at a couple of articles.

First the Times, Japanese machinery orders hit 23-year low:

• Machinery orders are one of the "principal engine rooms of the giant manufacturing economy"
• They "have crumpled at a “shocking” pace, plunging to levels last seen in the late 1980s."
• They are currently at a 23-year record low.
• "The machinery order numbers are often taken as a guide to future capital spending plans — the slump in orders could imply that Japanese companies are to some extent giving-up on the prospects for a domestic-demand led recovery and are now focusing on building capacity overseas to tap growth in more vigorous economies."

Okay, so according to the Times, the sky is falling. The problem with their article is they mix in a lot of information about deflation. I don't want to argue over definitions, but very mild general price reduction is what one would expect in a free capitalist society. (Something which doesn't exist today in Japan or anywhere in the developed world.)

On deflation the Times notes the following:

“The export-led economic recovery is struggling to spread over to domestic private demand,” one senior Cabinet Office official said. Domestic demand in Japan has been hurt by the “bedding-in” of deflationary expectations.

The main problem with decreasing demand overseas is Japan's economy will shrink. However, if you are a retiring saver, who cares? If the yen is strengthening, you get to buy lots of cheap overseas goods. That would be the vast majority of Japanese, retiring people with lots of savings. But wait, what's the problem? The problem is the government has borrowed so much money (and to a much less limited extent its corporate cronies as well) that they can't pay it back unless the economy grows or they devalue the yen or both. Sorry if you wanted an easy retirement that's just not in the cards.

I mean, I'm no expert, but that is certainly the way things *look* to me. The size of the economy isn't important. Deflation is good, when you are a saver.

Moving on, let's look and see what the Wall Street Journal says about the machinery order decrease in November, Japan Machinery Orders Hit Record Low:

• "Japan's core machinery orders, an important indicator of trends in corporate capital spending, fell to their lowest level on record in November, underscoring the continued sluggishness of the country's domestic demand." [People should want more according to macroeconomists and the government.]
• "Core orders dropped 11.3% from October to 625.3 billion yen ($6.84 billion), the cabinet office said. That was in stark contrast to the 1.2% mean increase forecast in a survey by Dow Jones Newswires and the Nikkei, and followed a 4.5% month-to-month decrease in October."
• "Behind the sharp drop were big declines in orders from both manufacturers, who placed 18.2% fewer orders, and from nonmanufacturers, whose total decreased 10.6%. The Cabinet Office said demand from the telecommunications and financial industries was especially weak."
• "Machinery orders figures tend to be volatile, so a sharp downward swing in monthly data doesn't automatically mean a further weakening in capital investment is coming."
• They yen was strong in November and there has been constant cost cutting and so on says one analyist, Toshihiro Nagahama at Dai-ichi Life Research Institute.

Hm. Okay.