By Stanley White
TOKYO (Reuters) - Japan's machinery orders fell in January at the fastest pace in four months due to a decline in orders from auto and telecommunications equipment makers and as the U.S.-China trade war dented global demand.
The 5.4 percent decline month-on-month in core machinery orders, a leading indicator of capital expenditure, was more than the median estimate for a 1.7 percent decrease and followed a revised 0.3 percent decline in the previous month. It was also the fastest month-on-month decline since September last year.
Capital expenditure is likely to remain weak for some time as exports fall and inventories pile up due to tit-for-tat tariffs between Washington and Beijing, which threaten to slow Japan's economic growth.
Orders from manufacturers fell 1.9 percent month-on-month in January after a revised 4.4 percent decline in December, Cabinet Office data showed on Wednesday.
Orders from non-manufacturers slumped 8.0 percent in January from the previous month, also the fastest decline in four months.
Highlighting the weakness in the global economy, machinery orders from overseas fell 18.1 percent in January, matching the decline in the previous month.
"Core" machinery orders exclude those for ships and from electricity utilities.
The United States and China are seeking to narrow their differences over trade but are yet to agree to a deal that would unwind punitive tariffs and restore global trade flows.
Economists say uncertainty over trade policy will discourage Japanese companies from increasing capital expenditure, which will act as a curb on economic growth.
Another risk for Japan's economy is the government's plan to raise the nationwide sales tax to 10 percent from 8 percent in October. The government needs the extra revenue for rising welfare costs, but the tax hike could also weaken consumer spending.
The Bank of Japan will likely maintain its view the export-reliant economy is expanding moderately but warn of heightening overseas risks at a policy meeting ending Friday, sources say, as China's slowdown and trade tension cloud the outlook.