Japan second-quarter corporate capital spending rises, but profits tumbleSeptember 5, 2019
Japanese companies raised spending on plant and equipment in April-June for the 11th straight quarter, underscoring the resilience of capital expenditure despite the Sino-U.S. trade war and slowing global growth.
Firms raised capital spending by 1.9% in the second quarter from the same period a year earlier, Ministry of Finance data showed on Monday.
On a seasonally-adjusted basis, capital expenditure grew 1.5 percent quarter-on-quarter in April-June.
The data will be used to calculate revised gross domestic product figures due on Sept. 9.
A preliminary reading out last month showed Japan’s economy expanded by a much-faster-than-expected 1.8% in April-June as solid household and business spending offset the blow to exports from trade frictions and weak external demand.
A tit-for-tat tariff war between the United States and China now involves hundreds of billions of dollars of each country’s goods and threatens global economic growth. Both sides imposed new tariffs on Sunday in the latest escalation, though Washington says face-to-face trade talks will resume sometime this month.
In Japan, a scheduled sales tax hike to 10% from the current 8% in October could undermine private consumption that constitutes about 60% of the world’s third-largest economy, adding to uncertainty.
The previous tax hike from 5% in April 2014 dealt a blow to consumers and triggered a deep downturn in a broader economy.
Capital expenditure has been a bright spot, however.
Companies are refurbishing old equipment and boosting investment in automation and labor-saving technology to cope with labor shortages in an aging society.
Manufacturers’ capex fell 6.9% on-year, but non-manufacturers’ spending rose 7.0.
Monday’s data also showed corporate recurring profits fell 12.0% in April-June from a year earlier, swinging from a 10.3% gain in the previous period.
Sales rose a meager 0.4%, up for a 11th straight quarter but slowing sharply from the previous period’s 3.0% gain.