Japan Q1 corporate capital spending rises 3%, led by manufacturers

Author of the article: Reuters Tetsushi Kajimoto TOKYO — Japanese firms raised capital spending for the fourth straight quarter in January-March, underscoring the resilience of business investment despite uncertainty over the pandemic and the war in Ukraine. Firm business expenditure could raise hopes for policymakers counting on cash-rich Japanese corporations to splurge on investment in…
Japan Q1 corporate capital spending rises 3%, led by manufacturers

Author of the article:

Reuters

Tetsushi Kajimoto

TOKYO — Japanese firms raised capital spending for the fourth straight quarter in January-March, underscoring the resilience of business investment despite uncertainty over the pandemic and the war in Ukraine.

Firm business expenditure could raise hopes for policymakers counting on cash-rich Japanese corporations to splurge on investment in plants and equipment to underpin a domestic demand-led economic recovery.

Capital expenditure in the first quarter of this year rose 3.0% from the same period last year, following a 4.3% increase seen in the fourth quarter, Ministry of Finance (MOF) data showed on Wednesday. Gains were led by manufacturers of transport equipment and metals.

The reading be used to help calculate revised gross domestic product (GDP) numbers due next Wednesday. Some economists expect a downward revision.

“Capital spending remained firm particularly among manufactures led by global demand, but the service sector was reeling from the pandemic. As such it was not strong enough to bring upward revision to GDP,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“As the Japanese get used to the idea of living with coronavirus and border controls ease, service sector activity and inbound tourism will pick up, helping gradual recovery of capital spending and the broader economy going forward.”

The world’s No.3 economy contracted 1.0% in the first quarter of this year, preliminary data showed, as coronavirus curbs, supply disruptions and rising raw material costs hit consumption. The economy recorded two quarters of contraction in the past year, underscoring a fragile recovery.

Many economists expect the economy to return to growth in the coming quarters although the prospects for a V-shaped recovery are fading given the Ukraine crisis and the risk of resurgence in coronavirus infections.

By sector, the MOF data showed manufacturers’ business spending improved 5.9% from a year earlier, while that of non-manufacturers advanced 1.6%.

Corporate recurring profits rose 13.7% in January-March from a year earlier, while sales were up 7.9%.

On the quarter, capital expenditure rose 0.3% in January-March from the previous three months on a seasonally-adjusted basis. (Reporting by Tetsushi Kajimoto; Editing by Kim Coghill and Kenneth Maxwell)

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