— Adds Details, Economist Comments, Background From 6th Paragraph
— Japan Oct Machine Orders -6.9% M/M; MNI Median Forecast -0.5%
— Japan Oct Core Machine Orders Post 2nd M/M Fall in Row; Sep -8.2%
— Japan Govt Repeats View: Machine Orders Are Fluctuating
— Japan Oct Core Machinery Orders +1.5% Y/Y Vs Sep +9.8%
— Japan Oct Machine Orders From Overseas +1.6% M/M; Sep -21.7%

TOKYO (MNI) – Japan’s core private-sector machinery orders fell at
a faster-than-expected pace in October as slowing global demand and the
strong yen threaten the export-led recovery, data from the Cabinet
Office showed on Thursday.

In October, core private-sector machinery orders — which exclude
volatile demand from electric utilities and for ships and are viewed as
a leading indicator of corporate capital investment — fell 6.9% on the
month after a 8.2% drop in September.

The October figure was much worse than the median forecast in a
Market News International survey of economists for a 0.5% dip.

Core machinery orders are forecast to fall 3.8% in the
October-December quarter from the previous quarter, the first fall in
four quarters, following a 1.5% increase in the July-September quarter.

The Cabinet Office maintained its assessment, saying, “Machinery
orders are fluctuating, taking one step forward and one step back.”

Last month it revised down its view for the first time since
November 2010.

The manufacturing sector rebounded slightly in October after a
sharp drop in September while the non-manufacturing sector, which holds
a key to overall recovery in orders, remained weak.

“Machinery orders will drift sideways in the near-term, but we do
not take this as a sign of a downturn of the overall economic cycle,”
said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley
Securities.

Given a temporary shift of production of mainly automobiles from
flood-hit Thailand and a recovery from the long slump in domestic car
demand after the government ended a subsidy for buying low-emission
vehicles last year, machinery orders are likely to resume an uptrend
following a temporary lull, he said.

In October, core private machinery orders rose 1.5% from a year
earlier, marking the second straight y/y rise after rising 9.8% in
September.

Offshore orders, which are not part of core orders, rose 1.6% month
on month in October following a 21.7% drop in the previous month.

Japan’s bid to fully recover from the March earthquake disaster
faces high uncertainties as global growth has been hit by the deepening
European sovereign debt crisis and the strong yen erodes exporter
profits.

The yen hit a fresh life-time high of Y75.32 on Oct. 31, prompting
the Bank of Japan to conduct, on behalf of the Ministry of Finance,
yen-selling intervention for the dollar, the third such operation this
year.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4835 **

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