Japan's capex rises for first time since Covid-19 outbreak

[TOKYO] Japanese companies' capital spending rose in the April-June quarter, the first increase since the start of the global pandemic and a sign of revived corporate activity even as a resurgence in Covid-19 cases hit the services sector.

The rise in business expenditures offered a positive note for embattled Prime Minister Yoshihide Suga, who faces his ruling party's leadership race this month and looming general elections that must be held by late November.

Still, Suga is likely to remain under pressure to deploy large fiscal stimulus to make up for a lack of private-sector spending. He is set to order his ruling party to back a new economic package this week, local media reported.

Ministry of Finance (MOF) data on Wednesday showed capital expenditure rose 5.3 per cent in the second quarter from the same period last year when it fell 11.3 per cent due to the coronavirus pandemic.

It was the first increase in five quarters and followed a 7.8 per cent year-on-year decline in the January-March quarter.

The MOF data, which will be used to calculate revised gross domestic products (GDP) due next Wednesday, showed manufacturers' business spending rose 4.0 per cent from a year earlier, while that of service-sector firms grew 5.9 per cent.

On a seasonally-adjusted basis, capital expenditure gained 3.2 per cent in April-June from the previous quarter, the MOF data showed.

Corporate recurring profits jumped 93.9 per cent in the April-June period from a year earlier, while sales gained 10.4 per cent.

A preliminary estimate found Japan's economy grew an annualised 1.3 per cent in the second quarter as private consumption and business activities recovered from the effects of the pandemic on the world's third-largest economy. Still, the rebound was much weaker than that of other advanced economies.

Figures released on Tuesday showed the rapid spread of the Delta variant in Asia is disrupting supply chains and production of Japan's key sectors like car manufacturers.

REUTERS