Eoin Treacy's view -
Capital spending in Japan topped estimates during the first quarter of the year as the tightest job market in more than two decades drove investment in labor-saving technologies.
Capital expenditure rose 4.5 percent in the first quarter of 2017 from a year earlier (estimate +4 percent).Corporate profits climbed 26.6 percent. Company sales rose 5.6 percent.
A moderate economic recovery and a labor shortage have created a favorable environment for business spending, prompting companies to invest in technology. Today’s figures will be used to revise first-quarter growth, with the result due to be released next week. The preliminary reading showed an annualized expansion of 2.2 percent.
* “Non-manufacturers are taking the lead” as they try to save manpower to deal with the labor shortage, said Takeshi Minami, chief economist at Norinchukin Research Institute. “That’s a good trend. It’s long been said that old production systems are weighing on productivity.”
* “The business-spending figure in the GDP report may be revised up slightly” after the data, said Hiroaki Muto, chief economist at Tokai Tokyo Research Center in Tokyo. “With corporate profits rebounding a lot, companies are probably making investments to renew their old facilities and equipment or to boost productivity.”
* Spending minus software rose 5.2 percent from a year earlier (estimate +4.1 percent).
Japan is growing at a G-7 beating 2.2%. That’s not something we hear very often for a country that has been mired in deflation for what feels like forever. The fact it is occurring against a background of full employment and an increasing labour shortage suggests companies will be investing more in technology, automation and may as a last resort have to raise wages.
This section continues in the Subscriber's Area. Back to top