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Japan Q2 capex growth slows, keeps pressure for more economic stimulus

Tuesday, September 1, 2015 - 08:32
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Japanese corporate capital expenditure increased 5.6 per cent in April-June from a year ago, slowing from the previous quarter and adding to signs of an economy struggling to recover from a slump.

[TOKYO] Japanese corporate capital expenditure increased 5.6 per cent in April-June from a year ago, slowing from the previous quarter and adding to signs of an economy struggling to recover from a slump.

The data keeps pressure on policymakers to top up stimulus as they worry about persistent weakness in private consumption and exports with China's slowdown hitting global markets.

Corporate spending on plant and equipment, along with wage growth, hold the key to the success of Prime Minister Shinzo Abe's reflationary policies aimed at putting a firm end to 15 years of grinding deflation and economic stagnation.

The increase in capital expenditure followed a 7.3 per cent annual gain in January-March, data by the Ministry of Finance showed on Tuesday.

Excluding spending on software, capital expenditure fell a seasonally-adjusted 2.7 per cent from the previous quarter, after rising 6.0 per cent in January-March.

The data, which will be used for calculating revised gross domestic product data due Sept 8, also showed corporate recurring profits jumped 23.8 per cent from a year earlier with sales up 1.1 per cent.

A preliminary estimate showed the world's third-largest economy contracted an annualised 1.6 per cent in April-June as exports slumped and consumers cut back spending.

Many analysts expect any rebound in growth in the current quarter to be modest, as rising grocery costs cool consumption and sluggish Asian demand weigh on exports.

Policymakers are clinging to hope that capital expenditure will serve as a driver of Japan's recovery, but some fret the recent market turmoil may prompt firms to delay spending plans.

REUTERS