Japan's core private-sector machinery orders fell to seven-year low in June from a month earlier as the coronavirus continued to hamper demand and expenditure, the government said in a report on Wednesday.

According to the Cabinet Office, orders, excluding those for ships and from electricity utilities due to their volatility, dropped 7.6 percent to 706.6 billion yen (6.70 billion U.S. dollars), the lowest since February 2013.

Based on the latest figures, the Cabinet Office again downwardly revised its assessment saying that machinery orders are "decreasing."

Orders from manufacturers increased 5.6 percent to 298.2 billion yen (2.82 billion U.S. dollars), the office said, while those from non-manufacturers fell 10.4 percent to 428.4 billion yen (4.06 billion U.S. dollars) in the recording period.

The Japanese economy booked a record contraction in the April-June period of an annualized real 27.8 percent as a result of a near economic standstill amid pandemic-induced business closures in Japan and globally, which saw consumption, half of Japan's GDP, particularly hard hit.

Waning consumption in twine with capital expenditure falling 1.5 percent during the April-June period, took its toll on machinery orders, economists said, with the outlook still looking murky amid businesses' uncertainty about increasing spending during the pandemic.

In the three months to June from the previous quarter, machinery orders dropped 12.9 percent, the Cabinet Office said, while also projecting a 1.9-percent retreat in orders for the July-September quarter.

Orders from overseas, an indicator of future exports, meanwhile, retreated 3.9 percent to 539.7 billion yen (5.11 billion U.S. dollars), the office also said.

Total orders, meanwhile, fell 8.4 percent to total 1.71 trillion yen (16.21 billion U.S. dollars), the latest data showed.

Machinery orders are a key advance indicator for corporate capital spending and the government uses this key data to predict the strength of business spending in six to nine months.

A rise in capital expenditure here can boost the economy as Japanese companies are producing more machinery to meet rising demands from overseas markets.

A drop in such expenditure, as was seen among key components comprising Japan's recent GDP figure, can have the reverse effect.

Such business investment accounts for roughly 15 percent of Japan's economy.

Types of machinery included in the monthly government survey comprise engines and turbines, heavy electrical machinery, electronic and communication equipment, industrial machinery, machine tools, railway rolling stock, road vehicles, aircraft, ships, water crafts, as well as sub types in those categories.

Source: Xinhua