Business / Economy

Japan's business spending increased in January-March amid murky outlook

by Satoshi Iizuka

Kyodo

Capital spending by companies rose 6.1 percent in the January-March quarter from a year earlier, official data showed Monday, supporting the government’s view that the economy is in a moderate recovery phase despite the uncertain global outlook.

Investment by all nonfinancial sectors for purposes such as building factories and adding equipment and software stood at ¥15.68 trillion. It expanded 5.7 percent in the previous quarter.

The data released by the Finance Ministry showed a 10th straight quarterly gain, underpinned by investment by chemical firms to produce cosmetics and auto components as well as machinery makers to expand production of equipment for use in construction.

On a quarter-on-quarter basis, seasonally adjusted capital expenditures excluding spending on software rose 1.1 percent.

But economists doubt the upward trend will continue as trade tensions between the United States and China intensify, igniting risks to the global economy.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, said investment by domestic firms aimed at streamlining operations in response to the labor shortage appeared to have supported capital spending.

“As there are risks, including weak exports arising from an uncertain outlook for the global economy, companies may refrain from investment,” Shinke said.

Pretax profits at companies covered in the survey rose 10.3 percent from a year earlier to ¥22.24 trillion, following a 7.0 percent drop the previous quarter.

Sales climbed 3.0 percent to ¥372.52 trillion, up for the 10th straight quarter, helped by brisk demand for construction and mining machinery in North America.

The figures will be factored into a revision of gross domestic product data for the first quarter of 2019, which is scheduled to be released June 10.

Preliminary GDP data showed the world’s third-largest economy unexpectedly grew an annualized real 2.1 percent in the quarter due to a technical reason amid sluggish capital spending and personal consumption.

The Finance Ministry surveyed 31,565 companies capitalized at ¥10 million or more, of which 22,926, or 72.6 percent, responded.

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