Watching Machine Tool Orders in Japan
March 13, 2017
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
The news out of Japan over the weekend was really rather disappointing for machine tool orders in January fell 3.2% month-on-month compared to December and that followed December’s 2.1% increase. The “Street” in Tokyo had been looking for an increase in this important number of +0.5% and so this was even more of a disappointment than had been feared.
Worse, the “core” orders figure year-on-year was -8.2% and is the largest single year-on-year figure in nearly 3/4ths of a year. We shall note for the record that the broad machine tool figure and that of the “core” rate are perhaps as volatile as are Durable Goods orders here in the US each month, thus we are willing to “shrug off” the material bearishness of this report to some modest extent. However, should machine tool orders next month also be lower we’ll not be able to be quite so cavalier about this data point. Further, this is relatively “old” news and as such we tend not to give it a great amount of credibility as we might to news that is “younger” in nature, January being two months ago.
Finally, this news is sufficient to allow the Bank of Japan to continue to err in favor of easier monetary policies a while longer. That, on its face, would seem to suggest that the Yen would be weak and thus the fact that the Yen has strengthened is impressive for the Yen and is “depressive” of the US dollar.