Japanese machinery orders rose for the second month in a row in line with solid overseas demand. However, the price of raw materials and distribution costs are still obstacles.
On Monday (17/January), Japan's Cabinet Office released data on machine orders which rose 3.4 percent in November. Although a slight decrease compared to the previous month's increase, this figure still outperformed the forecast for an increase of 1.4 percent.
On an annual basis, machine orders data for success jumped from 2.9 percent to 11.6 percent year-over-year in November. This figure managed to exceed expectations of a 6.1 percent increase.
This morning's quite impressive Japanese machine order data was supported by increasingly solid international market demand. It should be noted that machine orders data is one of the indicators to measure the capital expenditures of Japanese companies and industries which have an impact on GDP.
Up to now, Japanese companies still tend to be cautious in spending due to production cost problems that were previously triggered by soaring prices for raw materials, fuel, and distribution costs. These factors have led to rising producer inflation and depressing company profit margins.
Despite the various obstacles that still linger in Japan's industrial sector, this morning's Japanese machinery orders data further added to the evidence that the economy continues to improve after experiencing a contraction in the third quarter. Experts expect the Japanese economy to rebound to an annualized 6.5 percent in the fourth quarter of 2021, supported by rising projections for private consumption, which accounts for more than half of Japan's GDP.
USD/JPY Trying to Rise
The US dollar turned higher against the yen in Asian trading earlier this week. The USD/JPY pair is moving in the range of 114.32, up 0.16 percent from the daily open price. Technically, the US Dollar is trying to trim losses from the losses that formed over the past week.
Apart from US and Japanese economic data, analysts assess if the current bearish movement of the Dollar is related to the prospect of Quantitative Tightening which has the potential to diminish the urgency of the Fed's rate hike. Even so, the Fed's hawkish stance is generally believed to still support the Greenback's position in the medium term.
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