Japan’s machinery orders increased at the fastest pace in four months in May, Bloomberg reported this week. The increase is a sign that companies are increasing their spending to restore businesses and production disrupted by the March 11 earthquake and tsunami.
Factory orders, an indicator of capital spending, increased 3 percent in May compared with April. Companies are forecasting profits to recover later this year and are increasing spending plans as manufacturers restore facilities and the government rolls out stimulus to rebuild from a disaster that left more than 22,000 people dead or missing. Komatsu Ltd., Japan’s largest and the world’s second-largest construction equipment manufacturer said reconstruction plans are propelling demand.
A survey by the Bank of Japan recently indicated that large companies plan to increase capital spending 4.2 percent in fiscal 2011, exceeding analysts’ forecasts for a 2.4-percent spending hike. Japan’s industrial production rose at the fastest pace in more than 50 years in May, led by car manufacturers, according to a government report.
Efforts to rebuild damaged areas are increasing demand for excavators and wheel loaders. Komatsu CEO Kunio Noji said recently that Japanese orders for the equipment jumped more than 30 percent in April through June compared with the same period a year ago. Japan’s government last month estimated the damage to buildings, roads and other infrastructure from the March disaster to be about JY16.9 trillion (about U.S. $209 billion).
Japan’s parliament in early May passed an emergency JY 4 trillion (about U.S. $49 billion) relief budget to help fund reconstruction efforts.
Machinery orders from construction companies jumped 41.5 percent.