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Japan’s capex leaps in 2nd quarter
September 04, 2018
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TOKYO: Japanese corporate capital expenditure jumped in April-June by its most since 2006, raising hopes for sustainable economic recovery led by the private sector, although global trade tensions cloud the outlook for an export-reliant economy.

Ministry of Finance (MOF) data out on Monday showed capital expenditure in the second quarter rose 12.8 per cent from the same period last year, led by investment in the production of cars and electronic components.

It marked a seventh straight quarter of annual growth in capital expenditure after posting 3.4 per cent gain in the previous quarter. It was the sharpest annual gain since 2006. MOF capex data, which will be used to update gross domestic product (GDP) figures for the second quarter due out Sept. 10, points to upward revision to growth estimate, analysts say.

Capital expenditure has been a bright spot in Japan’s economy, the world’s third largest, as companies update their fixed assets and invest in automation and labour-saving technology to cope with labour shortages.

However, a major trade war stemming from commercial tensions between the United States and China could hit the world economy hard, which would in turn hurt Japan’s exports and discourage corporate investment.

“Second quarter GDP will be revised up,” said Toru Suehiro, senior market economist at Mizuho Securities. “Taking weakening factory output into account, however, capital expenditure will struggle to accelerate from now on.”

A preliminary estimate found Japan’s economy grew by an annualised rate of 1.9 per cent in the second quarter on solid household and business spending.

Underscoring solid business activity, the Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 52.5 in August, above the 50 threshold that separates contraction from expansion, as new orders accelerated.

Monday’s data comes after a recent batch of soft indicators such as factory output and retail sales cast doubts over the strength of Japan’s growth in the current quarter.

Capital expenditure, excluding software, grew 6.9 per cent in April-June from the previous quarter on a seasonally-adjusted basis, rising for a fourth straight quarter and the fastest gain since 2011, the MOF data showed.


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