Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

Japan's capital spending extends declines as firms tighten purse strings

Economic Indicators May 31, 2021 10:20PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: An employee wearing a protective face mask and face guard works on the automobile assembly line at Kawasaki factory of Mitsubishi Fuso Truck and Bus Corp, owned by Germany-based Daimler AG, in Kawasaki, south of Tokyo, Japan May 18, 2020. REU

By Daniel Leussink

TOKYO (Reuters) - Japanese companies cut spending on plant and equipment for the fourth straight quarter in January-March, as the economy struggles to shake off the drag from the coronavirus pandemic.

Weak business spending is likely to worry policymakers hoping strong domestic demand can help make the country's economic recovery more sustainable.

Ministry of Finance (MOF) data out on Tuesday showed capital expenditure in the first quarter fell 7.8% from the same period last year, pulled down by weaker investments in transportation equipment, electrical machinery and real estate.

It marked the fourth consecutive quarter of annual decline in capital expenditure, after a 4.8% contraction the final quarter of last year.

"The figure gives a weak impression, but GDP was originally weak already," said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

A separate, private-sector survey on Tuesday showed Japan's factory activity expanded in May, largely thanks to strong external demand, but at a slower pace.

The world's third-largest economy slumped back into decline in the first quarter as a slow vaccine rollout and repeated emergency curbs to halt a resurgence of infections hurt domestic demand.

The finance ministry's capex data, which will be used to update gross domestic product (GDP) figures for the first quarter due out June 8, was unlikely to impact the growth estimate in a major way, analysts said.

Some firms were seen putting off unnecessary investments in favour of holding onto cash, a finance ministry official said.

"Non-manufacturers have likely been building up cash positions rather than committing to spending for reinforcing safety, pushing back their capital expenditure plans beyond the fiscal year-end," said Takeshi Minami, chief economist at Norinchukin Research Institute.

RECOVERY SLOWING

After bouncing from last year's slump, driven by a strong export recovery, some analysts worry Japan's economy could slip back into recession in the current quarter due to extended coronavirus curbs.

A preliminary estimate found Japan's economy shrank an annualised 5.1% in the first quarter as households curtailed spending and export growth slowed sharply.

The latest MOF survey showed manufacturers' business spending fell 6.4% from a year earlier, posting a smaller contraction than the previous quarter's 8.5% drop.

That of service-sector firms dropped 8.5% year-on-year, up from a 2.6% decline in the previous quarter.

Weaker-than-expected factory output and retail sales figures on Monday showed that the economic recovery remained dependent on overseas demand.

Capital expenditure lost 0.4% in January-March from the previous quarter on a seasonally-adjusted basis, the MOF data showed.

Corporate recurring profits gained 26.0% in January-March from a year earlier, up for the first time in eight quarters, while sales were down for a seventh consecutive quarter, declining 3.0%.

Japan's capital spending extends declines as firms tighten purse strings
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email