Japan saw a significant decline in the value of machinery orders in September 2024. Orders fell by 2.9% compared to the previous month, according to data from 280 manufacturers operating in various sectors. This decline was on a seasonal basis, which means that it was somewhat expected given the market volatility that usually occurs at this time of year.
When looking at the overall situation of orders in the third quarter of 2024, we notice that there is an overall decline in demand. Total orders fell by 4.7% compared to the previous quarter. This decline reflects certain economic challenges, as it reveals a decline in industrial activity in Japan during this period.
especially in sectors that had seen continuous growth in previous periods.
As for orders from the private sector, they also declined. These orders exclude volatile orders such as those for ships or orders from electric power companies. When seasonally adjusted, orders fell by 0.7% in September. In the July-September period, orders fell by 1.3%. This indicates that the private sector, despite its great importance in supporting the economy, was affected by global and local economic conditions.
Explanation of the decline in orders in September
There are several factors that can explain this decline in orders in September. First, global economic challenges increased due to higher interest rates in some major economies such as the United States and Europe. This negative impact on global growth contributed to a decline in demand for industrial machinery and equipment in Japan.
Second, market data showed that some Japanese companies were affected by slowing growth in other markets such as China, which is one of Japan’s largest trading partners. Declining investments in some vital sectors such as construction and manufacturing also contributed to the decline in demand for machinery.
Forecast for the period from October to December 2024
Furthermore, seasonal factors affected the decline in orders in September. At this time of year, companies in Japan are often in a phase of evaluation and adjustment after the end of the fiscal half-year. This leads to some postponement of decisions related to investment in machinery and equipment.
Despite this decline in orders in the third quarter of 2024, expectations indicate a marked improvement in the October-December period. According to data released by machinery manufacturers, overall orders are expected to rise by 6.0%. The private sector, excluding volatile orders, is expected to see a 5.7% increase compared to the previous quarter.
These expectations indicate that demand for machinery and equipment may see a recovery in the last quarter of the year. Several factors contribute to this positive outlook. First, the stabilization of economic conditions in Japan and the return of industrial activity to levels closer to normal. Second, indicators indicate that some sectors such as automobiles and electronics will see renewed activity in demand for machinery.
Factors contributing to the increase in demand
Several factors indicate that there will be an improvement in demand for machinery in the fourth quarter of 2024. First, data indicates that Japanese machinery manufacturers may have started receiving new orders from key sectors such as the automotive and electronics industries. These industries are the largest users of machinery in Japan, and are witnessing new investments in upgrading production lines.
Second, there is an increase in government spending on infrastructure projects in Japan. These projects require huge investments in equipment and machinery. Therefore, this spending is expected to contribute to the increase in demand for machinery in the coming months.
Challenges that the sector may face in the near future
The improvement in the economic situation in neighboring markets is likely to support the recovery in machinery orders. As Asian economies, especially in China and South Korea, begin to improve, machinery demand may start to rise.
Despite the positive outlook for the last quarter, there are some challenges that may affect the growth in machinery demand in the near future. Among these challenges are the ongoing geopolitical tensions in some regions such as the Middle East and Ukraine, which could affect global supply chains.
In addition, rising production costs due to increased raw material prices may limit companies’ ability to increase their investments in machinery. In addition, sudden changes in interest rates or exchange rate fluctuations may increase market uncertainty.
Based on current data, Japan’s machinery orders are expected to see a significant improvement in the fourth quarter of 2024. This improvement is due to several factors, including the stability of the local economy, improvement in industrial activities in some sectors, and increased government spending on infrastructure projects. However, global and domestic economic challenges continue to threaten the continuity of this growth.
The Japanese manufacturing sector continues to look to the future with optimism, with a focus on increasing investments in advanced technologies such as automation and artificial intelligence. Whether companies can overcome current economic challenges will determine whether the positive outlook is realized.
Global Geopolitical Tensions
One of the most significant challenges facing the machinery orders sector in the near future is geopolitical tensions.
especially in regions such as Ukraine and the Middle East. These tensions could lead to disruptions in global supply chains, hindering companies’ ability to obtain raw materials or complete deals on time. For example, if conflicts escalate or economic sanctions increase between major powers, this could disrupt trade and delay production processes.
