TOKYO, Oct 9: Japan’s core machinery orders plunged at the fastest pace in two years, the government said on Thursday, reinforcing fears that Asia’s largest economy has slipped into a recession.

Core private-sector machinery orders, a leading indicator of corporate capital spending, slumped 14.5 per cent in August from the previous month, falling for a third straight month, the Cabinet Office said.

It was the steepest fall since a 15.9pc drop in July 2006 and worse than the market’s average forecast for a fall of around 3.6pc.

Macquarie Securities economist Richard Jerram described the figures as “dreadful.” While the orders tend to be volatile, the current financial crisis is “likely to encourage firms to postpone investment plans and hoard cash,” he warned.

The Nikkei stock index plunged 9.38 per cent on Wednesday, the biggest loss since “Black Monday” in October 1987. It fell a further 0.5 per cent Thursday.

But machinery orders are unlikely to continue falling at such a pace given buoyant investment by companies in research and development, said Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo.

Helped by strong overseas demand for their products, Japanese companies have been at the vanguard of a recovery in Asia’s largest economy from a slump stretching back more than a decade.—AFP