Third-quarter capital spending up

Kyodo

Capital spending by Japanese firms rose 2.2 percent on year in the quarter ended in September as automaking and smartphones surged, increasing the chance of an upward revision to economic growth, government data said Monday.

Business investment by all nonfinancial sectors for such purposes as infrastructure and introducing new equipment totaled ¥8.81 trillion, the Finance Ministry said. It was the fourth consecutive quarter of increase, although the pace declined from 7.7 percent in the previous quarter.

The ministry surveyed 31,037 companies capitalized at ¥10 million or more and drew valid responses from 22,544, or 72.6 percent.

The data will affect revisions to the July-September figures for gross domestic product, which the Cabinet Office will release on Dec. 10.

Compared with the previous quarter, capital expenditures fell 2.5 percent, which is tamer than the 3.2 percent drop in preliminary GDP reported Nov. 12.

This implies “a small upward revision to GDP in the second estimate,” economists at Credit Suisse Securities (Japan) Ltd. said in their report.

According to the earlier data, the world’s third-biggest economy contracted an annualized real 3.5 percent in the quarter, fueling speculation the country slipped into a mild recession amid falling exports and output slowed by the global economic downturn.

Monday’s result, however, did not sufficiently reflect deteriorating business sentiment, particularly among manufacturers in China, many of which were seriously affected by protests over a bilateral territorial dispute.

Negative fallout from the incident will surface in fourth-quarter earnings results, analysts said.

During the third quarter, spending by manufacturers grew 0.5 percent to ¥3.33 trillion for the fourth straight quarterly gain, while nonmanufacturers logged a 3.3 percent increase to ¥5.47 trillion, also expanding for the fourth quarter running.

Carmakers marked notable gains due to more investment in their production lines for new vehicles, leading the advance of manufacturers.

They were heartened by the government’s subsidy program for those who purchased environmentally friendly vehicles. But the fiscal stimulus for the industry ended in September, another factor that could weigh on business sentiment down the road.

Investment by the food processing and chemical industries also contributed to the increase.