Japan Machinery Orders Slide 3.3%

Japan’s machinery orders fell more than expected in August, a sign that companies will cut back spending as global demand slows. Orders, an indicator of capital spending in three to six months, declined 3.3 percent after rising 4.6 percent in July, the Cabinet Office said today in Tokyo. The median of 26 estimates in a Bloomberg News survey was for a 2.3 percent drop.

Today’s data follow government reports last month showing declines in industrial output and exports, underscoring the risk of a contraction in gross domestic product. In an interview in Tokyo, Japanese Prime Minister Yoshihiko Noda yesterday called for talks to contain economic damage from a dispute with China over East China Sea islands.

“There’s a growing number of people who are pessimistic about the economic outlook,” Jun Kawakami, an economist at Mizuho Securities Co. in Tokyo, said before the report. “It’s really hard to see any signs that companies will increase capital spending.” Read more >>

Japan Doubles its Sales Tax

Japanese Prime Minister Yoshihiko Noda won on Tuesday lower house approval for his signature tax-increase plan, but enough ruling party rebels rejected the plan to threaten a break-up of the party which could trigger an early election. The plan to double the sales tax to 10 percent over three years is seen as a first step towards curbing Japan's snowballing public debt, which already exceeds two years' worth of its economic output, a record for an industrialised nation.

A compromise struck with the opposition in mid-June allowed Noda to break months of policy gridlock and secure the plan's comfortable passage in parliament by 363 to 96 votes. But 57 ruling Democratic Party of Japan lawmakers voted against the bill.

If 54 or more of them left the party as a result, the Democrats would lose their majority in the more powerful lower house, raising the prospect of an election well before the next one is due by mid-2013. Critics, led by former Democrat leader Ichiro Ozawa, 70, credited for masterminding the party's 2009 election triumph, argue the tax increase is a departure from a party platform that promised to curb the powerful bureaucracy and cut wasteful spending before raising taxes. Read more >>