Japan: News Not Good

  So now we have Japan's industrial production rising less than expected in May, machinery orders falling, rather than & #160;rising and the balance of payments surplus for the same month smaller than expected.If the slump in Japan is over and the economy is starting to expand, it's showing it in a rather funny way.The & #160;rise in industrial output, reported a week ago, was less than expected and forecasts for June and July show a surprise slowing.But it is at least growth (5.9% up on April, which was 5.9% up on March) but with exports weak and imports down, deflation stalking the economy and unemployment rising, you'd think there wouldn't be too much in the way of more negative news to frighten people.The fall in machinery orders, which is a minor statistics, is nevertheless looked at as a forward indicator of activity in manufacturing.The 3% fall in core machinery orders May from April was a surprise, according to economists in Tokyo, who had been looking for a small rise to continue the idea of an economy steadying and grappling its way towards expansion.The Finance Ministry said the fall, to & #160;668.2 billion yen or & #36;US7.1 billion, was the lowest level since comparable records began in 1987.Core orders discount volatile orders from power companies and for & #160;ships. It was the third monthly fall in a row. & #160;Last week's Tankan sentiment survey for big business from the Bank of Japan spoke of larger than expected cuts in spending plans for the rest of the year, even though sentiment rose. Big business also sees a larger than previously stated fall in profits over the next year.The market had been expecting a 2% rise in machinery orders, so the fall is a sizeable difference to expectations.So the current account performance in May which contracted by 34%, was also a surprise to the market.According to the Japanese Finance Ministry, the surplus fell & #160;for the 15th month in row, this time to & #160;to Y1.30 trillion yen ( & #36;A17.32 billion).The average market forecast had been for a surplus of Y1.47 trillion yen ( & #36;A19.58 billion).In April, the surplus had plunged 54.5% year-on-year.But with import values lower because of the fall in iron ore, coal and oil prices, the surplus had been expected to rise from April by a lot more than what was reported.Japan's trade surplus in May fell 22.1 %, with exports off a still nasty & #160;42.2% and imports down 43.9% & #160;because of lower prices for commodities, led by oil.Machine orders from manufacturing companies rose 5.4% in May after a 9.4% drop in April but those from non-manufacturers fell 6.9% following an 8.8% drop in April.Orders for the three months to June are expected to be down 5% from the March & #160;quarter, following a drop of & #160;nearly 10% in the March quarter over December.Economists still believe the economy grew in the just finished June quarter, but now believe it could disappear over the next two quarters.They remain worried about rising unemployment, deflation and the still low level of demand for exports.  

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