Overseas orders for Japanese machinery posted their biggest tumble in more than a decade in December, as trade frictions dented global supply chain demand and manufacturers predicted further declines in orders this quarter.Data released on Monday showed core machinery orders, considered a leading indicator of capital expenditure, fell 0.1 percent month-on-month in December. This was the first decline in three months but was smaller than the median forecast for a 1.1 percent decrease.Highlighting bigger concerns about the external environment, however, was a 21.9 percent month-on-month slump in orders from overseas, the biggest fall since November 2007.The Cabinet Office data comes as some of Japan’s major corporates flag expected hits to sales to customers, which include downstream manufacturers who use Japanese components, amid an increasingly cautious investment environment.“Capital expenditure won’t be that strong, and this will hamper Japan’s overall growth,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.“We see the impact of trade friction. There’s a lot of uncertainty and manufactures are becoming more cautions.”A Cabinet official told reporters at a briefing the slump was partly due to the base effect of large overseas orders seen over the past two months. However, forecasts show manufacturers expect overseas orders to fall by another 17.1 percent in the current quarter.Manufacturers surveyed by the Cabinet Office forecast core orders will fall 1.8 percent in January-March after decreasing 4.2 percent in October-December. The Cabinet Office said in a statement machinery orders were “stalling”, a downgrade to its previous assessment, which described orders as “recovering but showing signs of stalling”.Quarterly data for the October-December period showed the broader decline in orders was driven by weakness in the chemicals, electronics, logistics and construction sectors.Signs Of PainGlobal trade has already slowed as the United States and China exchanged tit-for-tat tariffs in a heated dispute over trade. The proposed introduction of further tariffs, if a resolution between Washington and Beijing is not found, would hurt Japan’s export-focused economy.The trade war between the world’s two largest economies is a major risk for Japan’s auto, electronics, and heavy machinery sectors, which export goods to China where they are used to make finished products destined for the United States and other markets.In one example of the pain already felt, Japan’s Panasonic Corp cut its annual profit outlook earlier this month as the trade war hurt demand for auto components and factory equipment.“Demand for mechatronics, mostly motors, has plunged since November as our clients making equipment for smartphone factories cut their investment,” Panasonic’s Chief Financial Officer Hirokazu Umeda said.Published in Daily Times, February 19th 2019.