Japan capex growth weakens

- Advertisement -

TOKYO- Japanese companies increased spending on plants and equipment in April-June but the pace of annual gain was the lowest in five quarters, reflecting concern about a slowing growth in China and the health of the global economy.

Capital expenditures climbed 4.5 percent from a year earlier and fell 1.2 percent on a seasonally adjusted quarterly basis, finance ministry data showed.

China, the largest trading partner for export-reliant Japan, has only managed a sputtering economic recovery since re-opening its borders and in more recent months has been grappling with a worsening crisis in its property sector.

- Advertisement -

At the same time, sharp interest rate hikes and surging inflation in the US and Europe threaten to stymie demand for Japanese goods.

“Japanese firms are cautious given that the Chinese property bubble has been bursting in some regional cities. If that spreads to bigger cities, that will cool demand for China-bound shipments and capex,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“The worst could be yet to come. If Europe and America, which have held firm so far, cave to inflation pressure, that would further sap Japanese corporate appetite for investment.”

The capex data will be used to calculate revised gross domestic product figures due on Sept. 8. Given the quarterly decline in capital investment, the annualized second-quarter GDP growth rate will probably be revised down by around 1 percent point, Minami said.

On a preliminary basis, Japan’s economy expanded at an annualized clip of 6.0 percent .

But analysts said the expansion was somewhat softer than the headline figure suggested, as the figure was partly due to weaker imports that reflect tame domestic demand.

Highlighting Japan Inc caution about spending, corporate internal reserves rose 7.4 percent to hit an all-time high of 554.8 trillion yen ($3.8 trillion) in the year just ended, roughly the size of Japan’s annual economic output, the data also showed. – Reuters

Author

- Advertisement -

Share post: