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TOKYO, June 3 – Japanese companies cut spending on plant and equipment in the year to January-March for a second consecutive quarter, in a sign that Prime Minister Shinzo Abe’s sweeping stimulus has yet to encourage companies to boost business investment.
The 3.9 per cent fall in capital spending followed an 8.7 per cent annual decline in the final quarter of last year, which was the first decline in five quarters, Ministry of Finance data showed on Monday.
The reading suggests that there will be no major revision to Japan’s gross domestic product growth for January-March, after preliminary data showed expansion of 0.9 per cent from the previous quarter, or an annualised rate of 3.5 per cent, analysts said.
The latest capital spending figure will be used to calculate revised GDP data for the first quarter, due on June 10.
“My impression is that the pace of decline in capital expenditure is not large enough to lead to a significant change in GDP,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute.
“Capital expenditure has not improved yet, but there’s no reason to be pessimistic. The economy is recovering, but gains in capex may not appear until the third quarter.”
Japan’s first-quarter GDP growth was the fastest in a year, outpacing that of the US, as Mr Abe pursued a policy mix of massive fiscal spending and aggressive monetary stimulus.
Mr Abe’s policy gamble to beat the Japan’s 15-year-long deflation has boosted share prices and weakened the yen, prompting consumers to spend more and helping to raise revenue at exporting firms.
However, companies have been reluctant to increase spending on plant and equipment. Preliminary GDP data showed corporate investment fell 0.7 per cent from the previous quarter, marking a fifth straight quarter of declines.
Cabinet Office data showed last month that Japanese core machinery orders, a leading indicator of capital spending, jumped 14.2 per cent in March. But companies expected core orders to fall in the second quarter in a sign of wariness about substantially raising business investment.
Still, many analysts expect expenditures to pick up gradually as the world’s third-largest economy gains momentum.
Monday’s MOF data also showed that companies’ recurring profits rose 6 per cent in January-March from the same period last year, up for a fifth consecutive quarter.
Companies’ sales fell 5.8 per cent in the first quarter, down for the fourth straight quarter, it showed.
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