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Japan Q2 capex lacks momentum, suggests little change to revised GDP
[TOKYO] Japanese business expenditure fell in April-June from the previous quarter, suggesting only minor revisions will be made to recent gross domestic product figures and a sign that sluggish capital spending is hampering economic growth.
The capital spending data, which is used to calculate revised gross domestic product (GDP) due on Sept 8, underscores concerns about stagnation in the world's third largest economy.
A preliminary estimate showed the Japanese economy stalled in the April-June quarter, registering a meagre 0.2 per cent annualised expansion due to declines in exports and capital spending.
A recent batch of weak indicators including exports, factory output and household spending cemented market views that any rebound in the current quarter will be modest.
"Looking at quarter-on-quarter declines in capital spending, revised GDP would show little change from the initial estimate," said Yuichiro Nagai, economist at Barclays Securities.
"Capital spending has been weak so far and risks are tilting to the downside ahead, given the yen's gains from the start of the year."
Capital spending in April-June rose 3.1 per cent year-on-year, slowing from a 4.2 per cent annual gain in the previous quarter, Ministry of Finance data showed on Thursday.
However, capital expenditure fell 0.5 per cent from the previous quarter on a seasonally-adjusted basis after excluding software spending, slowing from a slight decline at the start of this year.
Compared to the same period a year earlier, corporate profits fell 10 per cent in April-June, as the yen's gains and reduced smartphone output dented profits at electronics firms. Disruptions caused by the Kumamoto earthquakes hit automakers.
Still, corporate profits were at the second-highest level on record in April-June versus the same quarter a year ago, a ministry official said.
The US dollar was trading at around 103 yen on Thursday. It has lost about 20 per cent against the yen this year before gaining some ground since Friday. A strong yen hurts Japan's exports, makes imports cheaper and undermines efforts to escape two decades of deflation and stagnation.