Corporate investment unexpectedly declined in the second quarter after services providers pared back spending, the Finance Ministry said Monday.
Capital spending sank 4.9 percent in the three months to June 30 after advancing 13.6 percent in the first quarter.
The ministry's report may hinder the Bank of Japan's case that the economy is strong enough for it to raise the key overnight call rate in two weeks. Companies may pare investment even more in the coming months if the U.S. housing crisis curbs demand in Japan's largest export market.