Capital spending by Japanese companies rose 4.2 percent from a year ago in the July-September period, the Finance Ministry said Friday, reinforcing the view that the economy remains on a moderate recovery trend.
Business investment by all nonfinancial sectors on plants, equipment and other purposes stood at ¥10.79 trillion ($96 billion), marking the fourth straight quarter of gain.
Pretax profits at businesses covered in the latest poll increased 5.5 percent to ¥17.89 trillion, a record-high for July-September, helped by the yen’s depreciation, according to the quarterly data.
In the three months through September, the economy grew at an annualized rate of 1.4 percent in real terms, marking the longest growth run in over 16 years of seven straight quarters. Corporate spending, one of the key components of the country’s gross domestic product, was up 0.2 percent from the preceding quarter.
The government of Prime Minister Shinzo Abe has been calling on companies seen to be hoarding cash amid uncertainty over the business outlook to step up investment.
Economists expect an upward revision to Japan’s GDP data for July-September — due out on Dec. 8 — that will reflect the latest capital spending data.
“Capital spending is at levels still lower than those before the ‘Lehman shock’ but it has been recovering at a moderate pace,” said Hidenobu Tokuda, senior economist at the Mizuho Research Institute, referring to the collapse of U.S. investment bank Lehman Brothers Holdings Inc. in 2008.
“The recovery trend is expected to continue, supported by investment in automation to cope with labor shortages and demand related to the hosting of the Tokyo Olympics and Paralympics” in 2020, Tokuda added.
According to the quarterly data, capital spending by manufacturers increased 1.4 percent to ¥3.88 trillion as companies sought to boost output capacity for electronic parts.
Marking the fourth consecutive quarterly rise the nonmanufacturing sector registered a 5.9 percent gain to ¥6.92 trillion, partly due to strong construction demand for hotels.
Business investment in all industries excluding spending on software gained 1.0 percent on quarter.
Sales increased 4.8 percent to ¥338.70 trillion, led by gains in makers of production equipment as well as wholesale and retail companies.
The ministry surveyed 31,718 companies capitalized at ¥10 million or more, of which 23,066, or 72.7 percent, gave valid responses.