Japanese machinery orders rose as supply chain congestion eased. However, the outlook for production and spending remains weak. USD/JPY is moving steadily in response to this data.
On Monday (13/December), the Cabinet Office of Japan released data on Machinery Orders which rose by 3.8 percent on a Month-over-Month basis in October. This figure was higher than expectations for a 2.1 percent increase, and grew from the 0.0 percent stagnation in the previous period.
This morning's data is the first increase in the last three months. Growth was largely supported by easing bottlenecks in the raw material supply chain. However, the outlook for production and spending remains sluggish amid the fragility of the economic recovery. It should be noted that machine orders data is one of the most important economic indicators because it measures the outlook for capital expenditures in the next 6 to 12 months.
In a separate release, the Cabinet Office of Japan also released the Tankan manufacturing index which remained at 18 in the fourth quarter. Although unchanged compared to the previous release, this data slightly disappointed market expectations which predicted an increase to level 19. Meanwhile, the outlook for the Japanese manufacturing sector weakened from 14 to 13 in the fourth quarter.
For the non-manufacturing Tankan index, there was a spike from 2 to 9, exceeding market projections of an increase to level 6 only. This significant increase in non-manufacturing sentiment was driven by the lifting of COVID restrictions by the government at the end of the third quarter; this triggered a return of optimism for business actors in the service sector.
USD/JPY is moving steadily
Broadly speaking, the release of Japanese economic data this morning did not have a high impact on the movement of the Yen against the US Dollar. The USD/JPY pair was seen to be solid and moving in the range of 113.49, up 0.15 percent from the daily open price.
In the midst of a slow and fragile economic recovery, the recent series of releases of Japanese fundamental data provides a fairly mixed picture for BOJ policymakers. Investors' attention will then be on the BoJ's monetary policy announcement on Friday.
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