Capital spending by firms rose 5.6 percent from a year earlier in the April-June period for the ninth straight year-on-year quarterly gain, the government said Tuesday, indicating a continued recovery in business investment.
The 5.6 percent rise, however, missed economists’ estimates for an 8.8 percent gain. This suggests the country’s economy shrank more than the initial estimate of a 0.4 percent contraction on the quarter, said Marcel Thieliant, an economist at Capital Economics.
Business investment by all nonfinancial sectors for purposes such as building plants and purchasing new equipment totaled ¥9.04 trillion,the Finance Ministry said.
On a quarter-on-quarter basis, business investment, excluding spending on software, decreased a seasonally adjusted 2.7 percent from the January-March period, down for the first time in four quarters, the ministry said.
“As the figure was high in the January-March period, it cannot be said that business investment has taken a turn for the worse,” said Takeshi Minami, chief economist at the Norinchukin Research Institute.
“But the situation is becoming more unclear, especially in the overseas sector, given growing uncertainty over the Chinese economy,” Minami added.
The data will affect revisions to the nation’s economic growth figures, with the Cabinet Office scheduled to release revised gross domestic product data for the same period on Sept. 8.
A preliminary GDP report released on Aug. 17 showed the economy shrank an annualized real 1.6 percent in the three months, marking the first fall in three quarters, due to a drop in consumption and sluggish exports.
In the GDP report, capital spending — which accounts for around 15 percent of Japan’s GDP — fell 0.1 percent from the previous quarter, signaling a possible weakening in investment demand among companies.
Capital spending by manufacturers expanded 11.6 percent year on year to just over ¥3.1 trillion for the fourth consecutive quarterly gain. Nonmanufacturers posted a 2.6 percent rise to ¥5.8 trillion, up for the ninth straight quarter.
The data also showed pretax profits at businesses in all sectors covered by its poll jumped 23.8 percent from a year earlier to ¥20.3 trillion, the highest among comparable data available since 1954.
The profits were pushed up partly by reduced fuel costs amid declining crude oil prices as well as the positive effects of an increase in foreign tourism to Japan.
In the April-June period, sales by businesses gained 1.1 percent to ¥318.6 trillion on the back of favorable vehicle sales in North America and the positive effects of a weakening yen.
During the second quarter of 2015, the dollar surged ¥19.28 from a year before to ¥121.42 on an average basis, a ministry official said.
A falling yen usually supports exporters by making Japanese products cheaper abroad and boosts the value of overseas revenue in yen terms, helping improve corporate profits and prompting firms to expand their investment.