Japan's Corporate Spending Rises 13.6% to a Record (Update2)
By Lily Nonomiya
June 4 (Bloomberg) -- Spending by Japan's largest companies rose to a record in the first quarter, indicating firms are confident the global economy will keep expanding.
Capital spending climbed 13.6 percent in the three months ended March 31 from a year earlier, the Ministry of Finance said in Tokyo today. The pace was faster than the 10.1 percent median estimate of nine economists surveyed by Bloomberg News.
Sales and profit also surged to the highest ever, as companies benefited from the economy's longest postwar expansion. Growth in spending may spread from manufacturers to service providers as unemployment at a nine-year low fuels consumer demand.
``Corporate profits and sales continue to be strong, thanks to the weak yen and low interest rates,'' said Takuji Aida, chief Japan economist at Barclays Capital in Tokyo. ``Capital spending will keep expanding steadily as non-manufacturers join manufacturers.''
Sales rose 6.3 percent and profit climbed 7.4 percent, the Finance Ministry said. Excluding spending on software, business investment rose 14.2 percent.
The yen traded at 122.01 per dollar at 9:50 a.m. in Tokyo, from 122.08 before the report. The yield on Japan's benchmark 10- year bond rose 3 basis points to 1.8 percent.
Revised GDP
Today's report means the economy grew at a faster pace than the government initially estimated last quarter, according to Yasukazu Shimizu, an economist at Mizuho Securities Co. in Tokyo.
The world's second-largest economy expanded 0.9 percent in the three months ended March 31 from the previous quarter, faster than the 0.6 percent reported by the government on May 17, Shimizu said. Today's survey will be the key component of the government's revised gross domestic product report on June 11.
Reports last week showed the jobless rate fell to 3.8 percent in April, the lowest level since March 1998, and household spending rose for a fourth month, the longest winning streak in three years.
TDK Corp., Japan's biggest maker of magnetic heads, said last month it will spend 50 billion yen ($410 million) to build an electronics component factory in Yurihonjo, northern Japan. The company makes chips used in mobile phones, computers and flat- panel televisions.
Growth in spending moderated from the fourth quarter, when companies increased investment a record 16.8 percent. Spending by manufacturers climbed 12.7 percent, slowing from 15.4 percent. Investment by non-manufacturers rose 14.1 percent, slower than the 17.5 percent pace in the fourth quarter, the ministry said.
Steady Growth
``Slower capital spending isn't negative for the economy,'' said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Capital spending will keep growing steadily as companies are rightfully being cautious about overinvestment.''
The spending plans released by the Finance Ministry account for about 60 percent of the corporate outlays portion of revised GDP. On an annualized basis, the preliminary GDP report showed the economy expanded 2.4 percent in the first quarter.
Last month's GDP report showed corporate spending, which is measured by capital goods shipments in preliminary calculations, fell 0.9 percent from the fourth quarter, when it grew 2.3 percent. Inventories subtracted 0.1 percentage point from growth.
A separate report this week is expected to show that machinery orders, a key indicator of future spending plans, rose 5 percent in April, halting two months of declines.
Today's numbers exclude spending by financial and insurance companies, which are included in the GDP component, making it difficult to gauge how the report will affect GDP, Mizuho's Shimizu said.
By Lily Nonomiya
June 4 (Bloomberg) -- Spending by Japan's largest companies rose to a record in the first quarter, indicating firms are confident the global economy will keep expanding.
Capital spending climbed 13.6 percent in the three months ended March 31 from a year earlier, the Ministry of Finance said in Tokyo today. The pace was faster than the 10.1 percent median estimate of nine economists surveyed by Bloomberg News.
Sales and profit also surged to the highest ever, as companies benefited from the economy's longest postwar expansion. Growth in spending may spread from manufacturers to service providers as unemployment at a nine-year low fuels consumer demand.
``Corporate profits and sales continue to be strong, thanks to the weak yen and low interest rates,'' said Takuji Aida, chief Japan economist at Barclays Capital in Tokyo. ``Capital spending will keep expanding steadily as non-manufacturers join manufacturers.''
Sales rose 6.3 percent and profit climbed 7.4 percent, the Finance Ministry said. Excluding spending on software, business investment rose 14.2 percent.
The yen traded at 122.01 per dollar at 9:50 a.m. in Tokyo, from 122.08 before the report. The yield on Japan's benchmark 10- year bond rose 3 basis points to 1.8 percent.
Revised GDP
Today's report means the economy grew at a faster pace than the government initially estimated last quarter, according to Yasukazu Shimizu, an economist at Mizuho Securities Co. in Tokyo.
The world's second-largest economy expanded 0.9 percent in the three months ended March 31 from the previous quarter, faster than the 0.6 percent reported by the government on May 17, Shimizu said. Today's survey will be the key component of the government's revised gross domestic product report on June 11.
Reports last week showed the jobless rate fell to 3.8 percent in April, the lowest level since March 1998, and household spending rose for a fourth month, the longest winning streak in three years.
TDK Corp., Japan's biggest maker of magnetic heads, said last month it will spend 50 billion yen ($410 million) to build an electronics component factory in Yurihonjo, northern Japan. The company makes chips used in mobile phones, computers and flat- panel televisions.
Growth in spending moderated from the fourth quarter, when companies increased investment a record 16.8 percent. Spending by manufacturers climbed 12.7 percent, slowing from 15.4 percent. Investment by non-manufacturers rose 14.1 percent, slower than the 17.5 percent pace in the fourth quarter, the ministry said.
Steady Growth
``Slower capital spending isn't negative for the economy,'' said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Capital spending will keep growing steadily as companies are rightfully being cautious about overinvestment.''
The spending plans released by the Finance Ministry account for about 60 percent of the corporate outlays portion of revised GDP. On an annualized basis, the preliminary GDP report showed the economy expanded 2.4 percent in the first quarter.
Last month's GDP report showed corporate spending, which is measured by capital goods shipments in preliminary calculations, fell 0.9 percent from the fourth quarter, when it grew 2.3 percent. Inventories subtracted 0.1 percentage point from growth.
A separate report this week is expected to show that machinery orders, a key indicator of future spending plans, rose 5 percent in April, halting two months of declines.
Today's numbers exclude spending by financial and insurance companies, which are included in the GDP component, making it difficult to gauge how the report will affect GDP, Mizuho's Shimizu said.
**Original Source = bloomberg.com**
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