Japan’s Q1 capex rises, suggesting upward revision to poor GDP
2024.06.02 22:28
By Tetsushi Kajimoto
TOKYO (Reuters) -Japanese companies raised spending on plant and equipment in January-March, helped by demand for automobiles and labour-saving investment and suggesting the economic decline in the first quarter may not be as severe as initially reported.
The data also points to a pickup in private sector-led growth, which is a prerequisite for the central bank to proceed with normalising monetary policy after it raised interest rates in March for the first time since 2007.
Japanese corporate capital spending rose 6.8% in January-March from the same period from a year earlier, Ministry of Finance data showed on Monday.
That represented the 12th straight quarter of gains, although the pace slowed from the previous quarter’s 16.4% and it fell 4.2% on a seasonally adjusted quarterly basis, showing momentum is patchy.
The data will be used to calculate revised gross domestic product figures due on June 10. Preliminary GDP data showed Japan’s economy contracted 2.0% annualised in the first quarter.
“Capex is not that strong although it will gradually be picking up in the coming months backed by domestic demand rather than uncertain global outlook,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Taken together with public works investment and increase in inventories, this capex data will probably contribute to upward revision to a contraction of 1.8% annualised.”
The preliminary GDP print published last month showed the capex component was a drag on growth in the first quarter.
The solid first-quarter capex data on Monday could bolster the case for the central bank to proceed with normalising monetary policy over time, some analysts say.
Monday’s MOF capex data also showed corporate sales rose 2.3% in the first quarter from a year earlier, and recurring profits increased 15.1%.
The value of corporate profits came to 27.4 trillion yen in the first quarter, the third-largest on record due to an increase in demand for cars, chemicals, and real-estate investment and other services.
