TOKYO -- Japanese machine-tool orders marked their largest drop in more than two decades last month, suggesting that shrinking capital investment may deal a further blow to Japan's recession-hit economy in the months ahead.
Machine-tool orders fell 71.9% year-to-year in December, following November's 62.1% drop, preliminary data from the Japan Machine Tool Builders' Association showed. Machine-tool orders totaled 36.7 billion yen ($411.8 million) in December.
Machine-tool orders are considered a leading indicator of capital investment, and December's plunge suggests companies are cautious about increasing capacity as demand shrinks at home and abroad.
This is particularly significant for Japan -- home to three of the world's top four machine-tool makers by sales -- and means the economy may continue deteriorating into 2009.
Japan's GDP is expected to contract by nearly 1.3% in the year through March 31 and by 1.2% in the following year, according to a survey of economists by the Economic Planning Association, a think tank related to the Cabinet Office.
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