Japan Machine Orders, Producer Prices Fall as Firms Cut Costs

June 10 (Bloomberg) -- Orders for Japanese machinery fell to a 22-year low and producer prices tumbled the most since 1987 as dwindling profits forced companies to cut costs amid the worst postwar recession.

Bookings, an indicator of capital investment in the next three to six months, fell 5.4 percent to 688.8 billion yen ($7.1 billion) in April, the lowest since 1987, the Cabinet Office said today in Tokyo. Wholesale prices, the costs companies pay for energy and raw materials, slid 5.4 percent in May from a year earlier, the Bank of Japan said.

The collapse in global demand has forced manufacturers to cut production by more than a third from last year’s peak. Companies aren’t ready to start spending again as plunging profits force them to cut workers and salaries, damping the prospect of a rebound in the world’s second-largest economy.

“Companies aren’t willing to increase investment because the recovery in demand is slow,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “The economy will probably return to growth this quarter, but it may be temporary because capital investment and consumer spending are slow to recover.”

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