On Monday, the Nikkei traded lower after the Japanese government released the core machinery orders data. The core machinery orders report was highly negative, and that’s what led the Indice lower. On top of that, the corporate goods price index matched expectations for the month of February. Finally, the yen pushed lower allowing the Nikkei the freedom to stay afloat. The Nikkei opened lower by 0.5% in early trade, but started to gain ground mid-session.
Core Machinery Orders
The Japanese Cabinet Office released the core machinery orders data for the month of January.
The data showed that orders orders orders ordersordersorders orders orders. There are two problems with respect to this data. The first of which is that a drop in orders indicates that the economy is struggling. The second issue is that there was an expectation that the orders number would see an increase by 0.5%.
The core machinery orders data is important because it deals with the Japanese economy. It is a measure for capital spending, and that is something that can potentially drive growth for the economy. It must improve because Japan has been facing deflation. The Bank Of Japan — BOJ — has been trying to get the economy to a 2% inflation rate, but has failed to do so. If the economy is to improve, then the core machinery orders number must show an increase in February’s data.
Producer Price Index
The corporate goods price index — CGPI — showed showed showed showedshowedshowed showed showed showed showed. There is a key positive and negative aspect to this data. The positive thing about this data is that it matched analysts’ expectations. The negative aspect is that the CGPI came in below January’s 0.6% gain. A decrease in CGPI over the last two months shows that deflation is still very much at play in the economy. The pricing power in the economy remains weak, despite the Bank of Japan’s effort to stimulate it. The CGPI is important because it tracks the average price level for both consumer and capital goods bought by Japanese producers. It is another growth prospect for the economy.
