Key facts
- Japanese companies' capital expenditure rose 1.6% year-on-year in the second quarter.
- Investment including software increased by 1.6% quarter-on-quarter.
- Manufacturers' current profits declined 11.5% year-on-year.
- The Ministry of Finance data will inform revised Q2 GDP figures.
Japanese companies increased their spending on plant and equipment by 1.6% in the second quarter compared to the same period a year earlier, according to data released by the Ministry of Finance. This figure includes investment in software.
Investment excluding software rose 0.2% quarter-on-quarter, a slowdown from the 2.0% increase seen in the first quarter. However, investment including software saw a 1.6% quarter-on-quarter rise, following a 1.9% increase in Q1, and was up 7.6% year-on-year.
The Ministry of Finance survey also indicated that manufacturers' current profits fell 11.5% year-on-year in the second quarter, marking the second consecutive decline. This downturn is attributed to tariff pressures and contributes to uncertainty surrounding future capital expenditure.
Preliminary data had previously shown Japan's economy expanding at an annualized rate of 1.1% in the second quarter, a slower pace than the 1.9% growth in the preceding quarter, primarily due to weaker household and business spending. The Ministry of Finance's capex and inventory figures are key inputs for revising the Q2 GDP estimates, which are scheduled for release on September 8. The current preliminary GDP estimate is +1.3% year-on-year.