By Max Sato
(MaceNews) – Business investment in equipment by many Japanese companies remained depressed in the July-September quarter, compared to year-earlier levels, but the pace of decline decelerated from the previous three-month period, a quarterly survey by the Ministry of Finance released Tuesday showed.
This may prompt the Cabinet Office to make only a minor revision to its estimate for private-sector capital investment in revised (second preliminary) gross domestic product data for the third quarter due in a week.
The key points from the Financial Statements Statistics of Corporations by Industry:
- Combined capital investment by non-financial Japanese companies fell 10.6% on year in July-September, the second straight quarter of decrease after slumping 11.3% in April-June. The pace of decline decelerated slightly but companies appeared to be still cautious about implementing capex plans amid high uncertainty over global and domestic demand.
- Non-financial firm capital outlays (excluding software), a key indicator for GDP revisions, posted the fourth consecutive decline, down 11.6% on year after falling 10.4% in Q2. On quarter, capex (excluding software) slipped just 1.3% in Q3 for the second straight q/q fall, improving from Q2’s sharper 7.5% drop (revised down from -6.7% reported three months ago).
- The MOF survey results are unlikely to lead to a major revision to “private-sector non-residential investment” in Q3 GDP, which slipped a preliminary 3.4% on quarter, or an annualized 12.8%, trimming the gross domestic product by 0.6 percentage point.
- Japan’s economy for the July-September quarter surged 5.0% on quarter, or an annualized 21.4%, led by a rebound in net exports and consumer spending, but it only recovered just over a half of a record plunge in April-June amid the pandemic-triggered slowdown, Cabinet Office data released earlier showed.
- The amount of business investment (excluding software) reported in the MOF survey rose 11.8% in July-September from April-June. It is in line with the 11.9% gain on quarter in nominal demand-side capex estimated by the Cabinet Office based on nominal supply-side capex figures that were available in the preliminary GDP data released on Nov. 16.
- The MOF survey based on the demand side is the key to calculating revisions to Q3 GDP due out on Dec. 8. Capex in preliminary GDP, which is based solely on supply side data.
- The MOF data showed business investment in the manufacturing sector marked the fourth consecutive year-on-year drop, down 10.3% on year in Q3 after slipping 9.7% in Q2, while that in the non-manufacturing sector dropped 10.8%, the second straight y/y fall, following a 12.1% decline in the previous quarter.
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Contact this reporter: max@macenews.com.
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