JAPAN DATA: Core Machine Orders Weaker Than Forecast

The focus of the week in NZ is Wednesday’s Q4 CPI data which is forecast to show a moderation in headline and non-tradeables inflation. There are also some monthly indicators released this week.

• Headline returned to the RBNZ’s 1-3% band in Q3 and is expected to ease 0.1pp to 2.1% y/y posting a 0.5% q/q rise in Q4. The RBNZ forecasted 0.4% q/q & 2.1% y/y in November. Non-tradeables is projected to rise 0.8% q/q which would result in the annual rate moderating to around 4.7% y/y from 4.9%. Tradeables are forecast to rise 0.1% q/q after falling 0.2% in Q3.
• Tuesday sees the Business NZ performance of services index for December released. It rose to 49.5 in November, the highest since February and approaching the breakeven-50 mark. Manufacturing rose moderately last month.
• December card spending is also released on Tuesday. Both the total and retail measures were close to flat on the month in November but are showing positive and improving 3-month momentum. Consumer confidence rose over Q4 helped by significant rate cuts and so December spending may see some improvement.
• November net migration prints on Thursday. Initial readings have tended to be revised down over H2 2024 as immigration slows. The softening labour market has discouraged people moving to NZ and encouraged New Zealanders to shift to Australia, where net job creation continues. Q4 NZ labour market data are published on February 5.

Japan Nov core machine orders data comfortably beat expectations. We were up 3.4%m/m, versus -0.8% forecast (prior was +2.1%). In y/y terms we rose 10.3%, against a 4.2% forecast (prior as 5.6%). 

•  The +10%y/y print for core machine orders was back close to 2024 highs. Momentum recovered strongly through Q4 and was mostly ahead of market expectations. In terms of the detail, the non-core items were quite volatile (which is typically the case). In y/y terms, manufacturing orders were 15.3% y/y, versus 7.6% prior. Non-manufacturing was 6.8% from 27.7% in Oct.
• The chart below overlays this print against Japan capex spending (ex Software) in y/y terms. It suggests a firm capex backdrop prevailed into year end for Japan.
• This isn't a key watch point for the BoJ, with wages and inflation more in focus, but still will be welcomed ahead of Friday's policy outcome. It is a sign of a resilient economic backdrop. 

Fig 1: Japan Core Machine Orders (White Line) versus Japan Capex, Ex Software (Y/Y)

India continues to see heavy outflows with $4.5b in outflows to kick the year off. South Korea saw net outflows last week, however is the only region with a net inflow for the year.

• South Korea: Recorded outflows of -$213m Friday, contributing to a 5-day total of -$479m. YTD flows remain positive at +$288m. The 5-day average is -$96m, worse than the 20-day average of -$22m but better than the 100-day average of -$154m.
• Taiwan: Posted inflows of +$376m Friday, leading to a 5-day total of -$1.56b. YTD flows are negative at -$2.16b. The 5-day average is -$312m, worse than the 20-day average of -$129m and the 100-day average of -$125m.
• India: Registered outflows of -$502m Thursday, resulting in a 5-day total of -$2.57b. YTD flows are deeply negative at -$4.53b. The 5-day average is -$514m, worse than the 20-day average of -$300m and the 100-day average of -$72m.
• Indonesia: Recorded inflows of +$15m Friday, with a 5-day total of +$15m. YTD flows remain negative at -$166m. The 5-day average is +$3m, better than the 20-day average of -$17m and matching the 100-day average of +$3m.
• Thailand: Posted outflows of -$37m Friday, contributing to a 5-day total of -$160m. YTD flows are negative at -$222m. The 5-day average is -$32m, worse than the 20-day average of -$13m but slightly worse than the 100-day average of -$8m.
• Malaysia: Saw outflows of -$48m Friday, leading to a 5-day total of -$295m. YTD flows are negative at -$429m. The 5-day average is -$59m, worse than the 20-day average of -$27m and the 100-day average of -$17m.
• Philippines: Registered outflows of -$2m Friday, bringing the 5-day total to -$57m. YTD flows are negative at -$81m. The 5-day average is -$11m, worse than the 20-day average of -$7m and the 100-day average of -$1m.

Table 1: EM Asia Equity Flows