Japan's Corporate Spending Rises 13.6% to a Record (Update4)
By Lily Nonomiya
June 4 (Bloomberg) -- Spending by Japan's largest companies rose to a record in the first quarter, indicating the world's second-largest economy probably grew at a faster pace than the 2.4 percent initially estimated by the government.
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. The report is a key component in recalculating first-quarter gross domestic product scheduled for release June 11.
``Capital spending wasn't as weak as we initially thought,'' said Yasukazu Shimizu, a senior market economist at Mizuho Securities Co. in Tokyo. ``Capital spending strength reflects companies' optimism about demand.''
The yen traded at 121.96 per dollar at 12:20 p.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.
Machinery makers, construction companies and transport equipment makers led the increase in spending, the report showed. Sales rose 6.3 percent and profit climbed 7.4 percent. Excluding spending on software, business investment rose 14.2 percent.
Revised GDP
The spending plans released by the Finance Ministry account for about 60 percent of the corporate outlays portion of revised GDP. The GDP report on May 17 showed corporate spending, which is measured by capital goods shipments in preliminary calculations, fell 0.9 percent from the fourth quarter. Inventories subtracted 0.1 percentage point from growth.
Kiichi Murashima, an economist at Nikko Citigroup Ltd., and Takuji Aida, chief economist at Barclays Capital in Tokyo, also said the report shows GDP growth was stronger than estimated.
The world's second-largest economy expanded an annualized 3.2 percent in the first quarter, according to the median estimate of five economists surveyed by Bloomberg News after today's survey, faster than the 2.4 percent initially reported.
From the previous quarter, the economy grew 0.9 percent in the three months ended March 31, more than the 0.6 percent the government reported last month, Shimizu said. Today's numbers exclude investment by financial and insurance companies, which are included in the GDP component, making it difficult to gauge how the report will affect GDP, he said.
TDK's Factory
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 plant in Yurihonjo, northern Japan. Toyota Motor Kyushu Inc., a subsidiary of Japan's largest carmaker, said last week it will spend 16 billion yen to construct a parts factory in Kyushu, southwestern Japan.
Growth in spending moderated from the fourth quarter's 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.
``Capital spending will keep growing steadily as companies are rightfully being cautious about overinvestment,'' said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
Both domestic and overseas demand may boost business investment in coming months. A 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.
The U.S. economy may be rebounding after growing at the slowest pace in four years last quarter. The trade deficit in Japan's largest export market probably narrowed in April, boosting manufacturing, according to economists surveyed by Bloomberg News. An index of non-manufacturing will show service industries expanded in May, economists said.
A recovery in spending by Japan's consumers may last. The jobless rate fell to 3.8 percent in April, the lowest level in nine years, and household spending rose for a fourth month, the longest winning streak in three years.
By Lily Nonomiya
June 4 (Bloomberg) -- Spending by Japan's largest companies rose to a record in the first quarter, indicating the world's second-largest economy probably grew at a faster pace than the 2.4 percent initially estimated by the government.
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. The report is a key component in recalculating first-quarter gross domestic product scheduled for release June 11.
``Capital spending wasn't as weak as we initially thought,'' said Yasukazu Shimizu, a senior market economist at Mizuho Securities Co. in Tokyo. ``Capital spending strength reflects companies' optimism about demand.''
The yen traded at 121.96 per dollar at 12:20 p.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.
Machinery makers, construction companies and transport equipment makers led the increase in spending, the report showed. Sales rose 6.3 percent and profit climbed 7.4 percent. Excluding spending on software, business investment rose 14.2 percent.
Revised GDP
The spending plans released by the Finance Ministry account for about 60 percent of the corporate outlays portion of revised GDP. The GDP report on May 17 showed corporate spending, which is measured by capital goods shipments in preliminary calculations, fell 0.9 percent from the fourth quarter. Inventories subtracted 0.1 percentage point from growth.
Kiichi Murashima, an economist at Nikko Citigroup Ltd., and Takuji Aida, chief economist at Barclays Capital in Tokyo, also said the report shows GDP growth was stronger than estimated.
The world's second-largest economy expanded an annualized 3.2 percent in the first quarter, according to the median estimate of five economists surveyed by Bloomberg News after today's survey, faster than the 2.4 percent initially reported.
From the previous quarter, the economy grew 0.9 percent in the three months ended March 31, more than the 0.6 percent the government reported last month, Shimizu said. Today's numbers exclude investment by financial and insurance companies, which are included in the GDP component, making it difficult to gauge how the report will affect GDP, he said.
TDK's Factory
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 plant in Yurihonjo, northern Japan. Toyota Motor Kyushu Inc., a subsidiary of Japan's largest carmaker, said last week it will spend 16 billion yen to construct a parts factory in Kyushu, southwestern Japan.
Growth in spending moderated from the fourth quarter's 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.
``Capital spending will keep growing steadily as companies are rightfully being cautious about overinvestment,'' said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
Both domestic and overseas demand may boost business investment in coming months. A 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.
The U.S. economy may be rebounding after growing at the slowest pace in four years last quarter. The trade deficit in Japan's largest export market probably narrowed in April, boosting manufacturing, according to economists surveyed by Bloomberg News. An index of non-manufacturing will show service industries expanded in May, economists said.
A recovery in spending by Japan's consumers may last. The jobless rate fell to 3.8 percent in April, the lowest level in nine years, and household spending rose for a fourth month, the longest winning streak in three years.
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