TOKYO (MNI) – Japan’s Cabinet Office said on Thursday that it will
completely remove orders for mobile handsets from the key core machinery
orders figure — starting with April 2011 data due out in June — so
that the data give a clearer picture of the trend in demand.

Core private-sector machinery orders, which already exclude
volatile demand from electric utilities and for ships, are viewed as a
leading indicator of corporate capital investment.

But the existing core reading includes orders for mobile handsets,
which are mostly for households, and thus do not help to accurately
gauge capex plans. Moreover, handset orders fluctuate significantly
from month to month.

The Cabinet Office has been releasing “core orders minus mobile
handsets” as a reference figure since April 2005 data, but it will now
make this series the official “core” reading, replacing the existing
core orders that only exclude power firms and ships.

Orders for mobile handsets accounted for as much as 9% of core
orders on average from fiscal 2005 to fiscal 2009 (the Cabinet Office
didn’t ask surveyed firms to separate orders for handsets before April
2005).

This means that removing this category completely from the data
will cause a gap in the level of “total” orders when the government
switches to the new formula with April 2011 data, but a Cabinet Office
official said the data still should be able to show a long-term trend in
new “core” orders.

To this end, the Cabinet Office will use its own estimate to work
out newly defined “core” orders (excluding demand not only from electric
utilities and for ships but also for handsets) in the already published
data for March 2005 and earlier, making it possible to make historical
comparisons dating back to April 1987.

Some economists have long urged that orders for mobile handsets
should be excluded from core orders because they largely come from
consumers, not corporations, thus distorting the data when used as a
leading indicator for capex.

Also, by including volatile orders for cell phone handsets, it is
harder to capture the trend, they have said.

The latest data published Thursday morning make this point clear.

In November, total core machinery orders including handsets fell
3.0% from October, the third straight m/m drop, while core orders
excluding mobile handsets rose 0.8%, up for the second consecutive
month.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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