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Japan's core private-sector machinery orders in April dived a seasonally adjusted 8.8 percent from the previous month, the government said Wednesday, casting a shadow over prospects for a pickup in business investment that Prime Minister Shinzo Abe sees as a mainstay of economic growth.
The orders, which exclude those for ships as well as those from utilities because of their volatility, fell for the first time in three months to 723.3 billion yen, the Cabinet Office said. They slid at their fastest pace since January 2009, when the country's economy was sluggish in the aftermath of the 2008 global financial crisis.
It was also the third-sharpest month-on-month drop in the orders, regarded as a leading indicator of capital spending, since comparable data became available in April 2005. In March, they rose at their quickest pace ever.
Some analysts said the results suggested business investment, which has stagnated over the past year, is unlikely to make a strong rebound, as skepticism lingers about whether Abe's policies dubbed "Abenomics" -- aimed at ending nearly two decades of deflation -- could really bolster the economy.
Recent financial market turmoil could also spark fears about the outlook for the world's third-largest economy, worsening corporate sentiment and discouraging companies from boosting investment, they added.
"Capital spending is now on a recovery track, but it is not powerful" as the economy has yet to show clear signs of getting on a sustainable growth path, said Kaori Yamato, an economist at Mizuho Research Institute.
"Firms might become more reluctant to increase their investment if market confusion is prolonged," she added.
The equity market turbulence began on May 23, when the 225-issue Nikkei Stock Average tumbled 7 percent. The yen has also resumed moving upward recently, dampening hopes that Japan's economy would steadily bounce back, analysts said.
Other economists, however, said capital spending is expected to pick up, as Abe's administration is set to pledge in its growth strategy to take steps to augment the total amount of business investment by 10 percent during the next three years to bring it up to around 70 trillion yen.
The growth strategy, which Abe's Cabinet plans to endorse on Friday, is one of the "three arrows" of "Abenomics" along with aggressive monetary easing by the Bank of Japan and large-scale public works projects.
In April, machinery orders from the manufacturing sector plummeted 7.3 percent to 286.2 billion yen, while those from non-manufacturers decreased 6.0 percent to 447.2 billion yen, both marking the first slides in three months.
In particular, orders from the petroleum and coal products industry and car makers fell following rapid growth in March.
Overseas demand for overall Japanese machinery, an indicator of future exports, plunged 19.9 percent to 821.7 billion yen, after skyrocketing 52.1 percent in the previous month.
The Cabinet Office left unchanged its basic assessment of core machinery orders for the fourth month in a row, saying they are "showing signs of moderately picking up."
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