Japanese Corporate Spending on Plant and Equipment Rises 7.4% in Second Quarter, Boosting Economic Growth Expectations
By Makiko Yamazaki
Japanese corporate spending on plant and equipment saw a significant increase of 7.4% year-on-year in the second quarter, according to Ministry of Finance data released on Monday. This data is crucial in calculating revised gross domestic product (GDP) figures, scheduled to be revealed on Sep. 9, and could potentially pave the way for the central bank to consider raising interest rates in the near future.
The preliminary data from last month indicated a 3.1% annualized growth in Japan's economy during the second quarter, marking a recovery from a sluggish start earlier in the year, driven by a notable surge in consumption.
Capital spending witnessed an acceleration compared to the previous quarter, with a 6.8% rise. On a seasonally adjusted quarterly basis, it increased by 1.2%.
Additionally, Monday's capex data revealed a 3.5% increase in corporate sales and a significant 13.2% rise in recurring profits during the second quarter.
Business spending has remained robust in recent years, largely due to companies investing to counteract the challenges posed by a shrinking labor force in Japan's aging population.
Capital expenditure is a crucial indicator of domestic demand-driven economic growth, and policymakers are relying on business investments to serve as a key driver for Japan's economy, especially as exports face uncertainties stemming from the U.S. and Chinese economies.
In conclusion, the rise in Japanese corporate spending on plant and equipment signifies a positive outlook for the country's economic growth. This could potentially lead to further interest rate hikes by the central bank and drive business investments, ultimately benefiting the overall economy and potentially offering opportunities for investors to capitalize on this growth.