• Kyodo

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Capital spending in the October-December quarter rose 2.8 percent from a year earlier to ¥9.71 trillion (about $81 billion), the government said Monday, signaling corporate willingness to keep increasing investment despite sluggish consumer spending.

Data released by the Finance Ministry also showed pretax profit at businesses in all sectors polled surged 11.6 percent to ¥18.07 trillion, the highest since 1954, according to comparable data, largely helped by a weaker yen.

The survey covered 31,164 companies capitalized at ¥10 million or more and drew valid responses from 22,952, or 73.6 percent.

On a quarter-on-quarter basis, investment, excluding spending on software, rose a seasonally adjusted 0.6 percent from July-September, but economists say the results, which were weaker than expected, could slightly push down next week’s growth figures.

The data will be used to calculate revised gross domestic product data for the final quarter of 2014, which the Cabinet Office will release Monday.

In October-December, business investment by all nonfinancial sectors for purposes such as building plants and installing new equipment rose for the seventh consecutive quarter. But that was smaller than the 5.5 percent gain in the previous quarter.

Monday’s reading showed capital spending by manufacturers climbed 8.0 percent year on year to ¥3.32 trillion for the second consecutive quarterly increase, while that by nonmanufacturers posted a 0.3 percent gain to ¥6.38 trillion, up for the seventh quarter straight.

“The results reflect the trend of the economy as a whole, which continues to recover moderately,” a Finance Ministry official said.

A preliminary GDP report Feb. 16 showed the economy expanded by an annualized real rate of 2.2 percent in the three months through December. It was the first growth in three quarters and marked an exit from the recession from last April’s 3-point consumption tax hike to 8 percent.

In the GDP report, capital spending — which accounts for around 15 percent of GDP — edged up 0.1 percent quarter on quarter.

Toru Suehiro, market economist at Mizuho Securities Co., said the upcoming GDP figure could be revised down slightly because Monday’s results were softer than expected, though the data showed that corporate investment was recovering moderately.

“Domestic spending failed to achieve a V-shaped recovery after the consumption tax hike, making it difficult to push up investment through domestic demand,” Suehiro said. “Whether corporate investment will expand further depends on growth of exports.”

In the reporting period, sales rose 2.4 percent from a year earlier to ¥340.97 trillion, backed by favorable demand for smartphones and electric components for automobiles, the ministry said.

In the fourth quarter of 2014, the dollar grew ¥13.79 to a more burly ¥114.15 on an average basis from 2013, the official said. A falling yen usually supports exports by making Japanese products cheaper abroad and boosts the value of overseas revenue in yen terms, helping improve profits and prompting firms to bolster investment.

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