TOKYO: Capital spending by Japanese companies increased 3.1 percent in the April to June period from a year earlier for the 13th straight quarterly rise, but a firming yen continued to hurt corporate profits, government data showed Thursday. Business investment by all nonfinancial sectors for purposes such as building plants and introducing new equipment totaled 9.31 trillion yen ($90 billion), the Finance Ministry said. The pace of growth slowed from a 4.2 percent gain in the previous quarter.
Capital spending by manufacturers climbed 11.1 percent from a year earlier to 3.51 trillion yen, led by automakers investing in facilities to manufacture new models, the ministry said. But business investment by the nonmanufacturing sector such as services and information and communications fell 1.3 percent to 5.81 trillion yen, declining for the first time in 13 quarters.
“Though consumer sentiment appeared to have improved due to the postponement of the consumption tax hike, it has not returned” to the solid levels seen before, said Yuichiro Nagai, an economist at Barclays Securities Japan Ltd. “It may be unlikely that the nonmanufacturing sector will lead corporate investment as seen last year,” he said. The latest corporate spending data will affect revisions to Japan’s gross domestic product data for the same period due to be released by the Cabinet Office on Sept. 8.
A preliminary GDP report released last month showed the Japanese economy grew an annualized 0.2 percent in real terms from the previous quarter, partly affected by weak corporate capital spending. Within the GDP data, capital spending — which accounts for around 15 percent of Japan’s GDP — dropped 0.4 percent for the second straight quarterly contraction. On a quarter-on-quarter basis, business investment, excluding spending on software, decreased 0.5 percent, the ministry said. The government of Prime Minister Shinzo Abe sees private-sector capital investment as key to shoring up the economy.
