Japan Oct-Dec capital expenditure up for the 3rd consecutive quarter

People wearing masks walk through an intersection in Tokyo on Feb. 28, 2022. (AP Photo/Koji Sasahara)

TOKYO (Kyodo) — Capital expenditure by Japanese businesses in the October-December period rose 4.3 percent from a year earlier, rising for the third consecutive quarter, helped by a recovery from the fallout. of the coronavirus pandemic, according to government data on Wednesday.

Investments from all non-financial sectors for purposes such as building factories and adding equipment totaled 11.6 trillion yen ($101 billion), according to data released by the Ministry of Finance.

Capital spending rose both on the year and from the previous quarter, with exports and production picking up as coronavirus infections remained at low levels in the reporting period, an official said. governmental.

“But we will be watching trade trends closely as the current January-March quarter sees a spread from the Omicron variant (of the coronavirus) as well as from Ukraine (crisis).”

Capital expenditure by manufacturers rose 5.1%, up for the third consecutive quarter, to 4.1 trillion yen, led by an increase in the transport equipment industry as automakers introduced new new models.

The increase was also due to easing supply chain disruptions for automakers, which in the previous quarter had to deal with plant closures in Southeast Asia, a major production hub. , amid a rise in COVID-19 cases, economists said.

In the non-manufacturing sector, spending rose 3.8% to 7.5 trillion yen for the third consecutive quarter, as the recovery of restaurants and accommodation affected by the pandemic contributed to the growth.

During the quarter under review, economic activities fully resumed in Japan, as the COVID-19 state of emergency was lifted on October 1 in all regions. People had been told to refrain from non-essential outings and restaurants were told to close earlier under the emergency declaration.

Pre-tax profits of companies covered by the ministry’s survey rose 24.7% to 23 trillion yen, up for the fourth consecutive quarter, boosted by chemical makers who saw robust demand for semi-automatic parts. -carriers as well as a recovery in the service sector.

Sales rose 5.7% to 351 trillion yen, up for the third straight quarter, also led by chemical makers.

But the uptrends are unlikely to continue with deteriorating business conditions stemming from a resurgence of COVID-19 and rising commodity prices, economists said.

In Japan, consumer spending could be affected by a near state of emergency declared in some prefectures due to the spread of the Omicron variant, while the Russian invasion of Ukraine has pushed up already high drug costs. raw materials, they said.

“Capital investments may not be so susceptible to change in the near term, but sales and pre-tax profits are expected to fall significantly,” said Taro Saito, executive research fellow at NLI Research Institute.

“The impact of the Ukraine crisis is already being felt in material costs such as crude oil prices, and the fact is how serious the (cost) problem could become,” he said. declared. “From a longer-term perspective, if a global recession begins in Europe, the Japanese economy will, of course, be dragged down.”

Given the latest capital expenditure figures, the Cabinet Office is expected to release revised gross domestic product data for the same quarter on March 9.

Preliminary GDP data showed the world’s third-largest economy recorded annualized real growth of 5.4%. Saito expected the figure to remain virtually unchanged or be revised slightly upwards.

The ministry surveyed 32,274 enterprises capitalized at 10 million yen or more, of which 22,272, or 69.0 percent, responded.