Japan Q2 corporate capex up 7.4%, points to solid domestic demand

TOKYO : Japanese corporate spending on plant and equipment rose 7.4 per cent year-on-year in the second quarter, Ministry of Finance data showed on Monday, keeping alive expectations of a domestic-led recovery in economic growth.
The solid expenditure data, which will be used to calculate revised gross domestic product (GDP) figures due on Sep. 9, could support the case for the central bank to raise interest rates further in coming months.
Preliminary data last month showed Japan’s economy expanded an annualised 3.1 per cent in the second quarter, rebounding from a slump at the start of the year thanks to a strong rise in consumption.
Capital spending accelerated from the previous quarter, when it rose 6.8 per cent. It grew 1.2 per cent on a seasonally adjusted quarterly basis.
Monday’s capex data also showed corporate sales rose 3.5 per cent in the second quarter from a year earlier, and recurring profits increased 13.2 per cent.
Capital expenditure is one of the key gauges of domestic demand-led economic growth as policymakers are counting on business investment to be an engine for the world’s No. 4 economy as exports struggle amid uncertainties around the U.S. and Chinese economies.
Business spending remained firm in recent years, driven by corporate appetite for investment to offset chronic labour crunch in the fast-ageing population.