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Japan's machinery orders fall 5.4% in Jan. amid China slowdown

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

TOKYO (Kyodo) -- Japan's core private-sector machinery orders fell for a third straight month in January, the government said Wednesday, signaling companies are becoming less willing to spend in the face of China's economic slowdown.

The orders, which exclude those for ships and from electric utilities because of their volatility, fell 5.4 percent from the previous month, the steepest decline since September. They totaled 822.3 billion yen ($7.4 billion).

The Cabinet Office maintained its assessment that orders are "stalling," having downgraded its view the previous month from "stalling in their recovery."

The orders are considered a leading indicator of capital expenditure, which has been one of the principal drivers of growth in the Japanese economy in recent years as firms put their earnings toward replacing aging equipment and improving productivity.

Gross domestic product grew an annualized real 1.9 percent in the fourth quarter of 2018, recovering modestly from a series of natural disasters, revised data showed last week.

But risks to the global economy, such as an economic deceleration in China, a major destination for Japanese exports, appear to be chipping away at companies' appetite for investment.

Slowing demand from China "certainly had some effect on the decline in orders," a government official said in a press briefing.

Orders from the manufacturing sector fell 1.9 percent to 375.0 billion yen amid shrinking demand from electrical machinery and telecommunications equipment makers.

From the nonmanufacturing sector, minus ships and electric utilities, orders dropped 8.0 percent to 454.9 billion yen as the transport and mail industries cut back on spending.

Total orders including those from the public sector and abroad fell 7.9 percent to 2.23 trillion yen.

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