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June machinery orders down 8.8%, indicating capital spending may weaken

This May 28, 2018 photo shows a production line operated by Mazda Motor Corp. at its plant in Hofu, Yamaguchi Prefecture, Japan. (Kyodo)

TOKYO (Kyodo) -- Japan's core private-sector machinery orders fell for a second straight month in June, government data showed Thursday, suggesting capital expenditure could weaken in coming months.

The orders, which exclude those for ships and from electric utilities because of their volatility, declined 8.8 percent from the previous month to 827.6 billion yen ($7.5 billion). The decline was sharper than the 3.7 percent fall recorded in May.

The Cabinet Office downgraded its assessment of machinery orders, saying they had been picking up, but are now in a lull.

Orders from the manufacturing sector fell 15.9 percent to 381.8 billion yen due in part to a fall in demand from electric machinery makers and chemical firms.

From the nonmanufacturing sector, minus ships and electricity, orders dipped 7.0 percent to 445.4 billion yen amid lower demand for machinery from construction firms and the retail industry.

Orders from overseas fell 12.0 percent to 925.0 billion yen, the lowest in a year.

Capital expenditure has been an important driver of economic growth in Japan in recent years, helping cover for persistent weakness in private consumption.

Should that change, it would pose challenges to Prime Minister Shinzo Abe, who is struggling to bring the country out of a years-long deflationary malaise.

The Cabinet Office will release gross domestic product data for the April-June quarter on Friday, with economists predicting the world's third-largest economy has rebounded after contracting in the previous quarter.

In April-June, core machinery orders rose 2.2 percent from the previous quarter to 2.68 trillion yen. But the office projected the orders will slip 0.3 percent in July-September.

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