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

Jun 01, 2022 04:41AM ET

By: AnalysisWatch

Japanese companies increased capital spending for the fourth consecutive quarter from January to March, underlining the resilience of investment in manufacturer-led companies despite uncertainties related to the COVID-19 pandemic and the war in Ukraine.

The rise in business spending could boost the hopes of policymakers who are counting on cash-rich Japanese companies to invest in factories and equipment to support an economic recovery driven by domestic demand.

Capital spending in the first quarter of the year rose 3.0% from the corresponding period a year earlier, following a 4.3% increase in the fourth quarter, according to Ministry of Finance data on Wednesday.

The increases were led by transport equipment manufacturers, due to investments in new technology, and metal producers, which had to increase production capacity.

The data will be taken into account in the revision of the gross domestic product (GDP) to be released next Wednesday. Economists were divided on the GDP revision forecast after the investment data, with predictions ranging from an annualized contraction of 0.5 per cent to a 1.7 per cent drop.

Last month, preliminary data showed that the world's No. 3 economy contracted 1.0% year-on-year in the first quarter, as coronary restrictions, supply disruptions and rising commodity costs hurt consumption. The economy has contracted two quarters in the past year, indicating a fragile recovery.

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

Minami expected the revised GDP data to show a slight downward revision, with a 1.2 per cent contraction.

In terms of sectors, Ministry of Finance data showed that manufacturing business spending improved 5.9% year-on-year, approaching pre-COVID levels, while non-manufacturing business spending increased 1.6%, still below pre-COVID levels.

Recurring corporate profits rose 13.7% in January-March from a year earlier to ¥22.8 trillion ($177 billion) for a record first quarter, while sales rose 7.9%.

On a quarterly basis, capital spending increased by 0.3% in the January-March period compared to the previous three months on a seasonally adjusted basis, according to ministry data.

(1 dollar = 129.1300 yen)

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