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Japan govt lowers assessment of capex as business spending wanes

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Japan's government lowered its assessment of capital expenditure in November for the first time in more than a year, as machinery orders and the production of capital goods weakened in a sign that companies are delaying investment.

[TOKYO] Japan's government lowered its assessment of capital expenditure in November for the first time in more than a year, as machinery orders and the production of capital goods weakened in a sign that companies are delaying investment.

The government's monthly economic report released on Wednesday said capital expenditure is flat in November, downgrading its assessment from October, when capital expenditure was said to be recovering.

The government left unchanged its overall assessment that there are some weak spots in the economy.

"The economy is in a gradual recovery trend, but there are some pockets of weakness," the Cabinet Office said in its monthly economic report on Wednesday.

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"Capital expenditure has stalled." The downbeat assessment comes one day after Prime Minister Shinzo Abe's government said it would ease regulations to spur corporate investment.

Mr Abe's government will announce a raft of policies this week to encourage higher wages, more capital expenditure and slow the decline in Japan's population, but some economists have said structural reforms are not moving fast enough to raise the potential growth rate.

Policymakers in the government and the Bank of Japan are counting on an increase in capital expenditure to raise productivity and create new jobs.

Initially, economists were optimistic because the BOJ's closely watched tankan survey showed companies planned to aggressively increase capital expenditure.

However, the capital expenditure component of gross domestic product, data on machinery orders and capital goods shipments have struggled, which suggests companies are still not confident enough about the economy to carry out their investment plans.

The government left unchanged its assessment that consumer spending is holding firm and that exports are weak.

Japan's economy has likely recovered from a technical recession in the middle of this year as consumer spending gains momentum, but there are lingering concerns that Mr Abe's economic policies are not having enough impact.

REUTERS

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