By Daniel Leussink
TOKYO (Reuters) – Japanese companies slashed spending on plant and equipment for the third straight quarter in October-December as manufacturers cut expenditures, casting doubt about the strength of the country’s recovery as the COVID-19 pandemic hit private demand.
Weakness in capital expenditure is likely to worry policymakers counting on private-sector investment to help the world’s third-largest economy decisively shake off the health crisis.
Separate data painted a more optimistic picture of Japan’s job market in January.
Capital spending fell 4.8% in October-December compared with the same period a year earlier, Ministry of Finance (MOF) data showed on Tuesday, posting a third straight quarter of declines following a 10.6% drop in July-September.
Business expenditure shrank 0.3% quarter-on-quarter on a seasonally adjusted basis, the data showed, as companies put off spending due to the pandemic compared to earlier in the year.
While that marked the smallest fall in three quarters, analysts said the capex data suggested a downward revision to fourth-quarter gross domestic product (GDP) data due March 9.
A preliminary estimate released last month showed Japan’s economy expanded an annualised 12.7% in the last quarter.
Before the health crisis hit, capital spending had been a bright spot in Japan’s export-reliant economy, driven by investment in automation and the high-tech sector as firms sought to cope with labour shortages in the ageing society.
Ordinary corporate profits dropped 0.7% in October-December compared with the same period a year before, extending declines to their seventh straight quarter.
Manufacturers’ business spending fell 8.5% from a year earlier, according to Tuesday’s survey, conducted among firms with at least 10 million yen in capital. It followed a 10.3% decline in the previous quarter.
Service-sector spending shed 2.6% year-on-year, following the third quarter’s 10.8% decrease.
Sales dropped 4.5% year-on-year in October-December, down for the 6th straight quarter and slowing further from the previous period’s 11.5% decline.
The jobless rate was unchanged at 2.9% in January from the previous month. Job availability climbed to 1.10 from the prior month’s revised 1.05, hitting its highest since June last year when the ratio stood at 1.12, labour ministry data showed.
“New job offers should rebound soon and lead to a further pickup in employment as the economy resumes its recovery,” said Tom Learmouth, Japan economist at Capital Economics.
“We expect employment growth to consistently outpace labour force growth this year.”
(Reporting by Daniel Leussink; Editing by Sam Holmes & Shri Navaratnam)
