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Japan’s Corporate Capex Growth Points to GDP Rebound

Japan's Corporate Capex Growth Points to GDP Rebound

Japan’s corporate capex growth has become a focal point of economic analysis as recent data indicates a significant rise in spending on plant and equipment during the first quarter of 2024. This increase, driven by robust demand in the automobile sector and investments in labor-saving technologies, suggests that the economic decline initially reported may not be as severe. The upward trend in corporate capital expenditure is a key indicator of private sector-led growth, which could pave the way for the Bank of Japan to consider further normalizing monetary policy.

Steady Growth in Corporate Capital Expenditure

According to data released by the Ministry of Finance (MOF), Japanese corporate capital spending rose by 6.8 percent in January-March compared to the same period the previous year. This marks the 12th consecutive quarter of gains, although the pace has slowed from the 16.4 percent increase observed in the previous quarter. On a seasonally adjusted quarterly basis, capex fell by 4.2 percent, highlighting some unevenness in momentum. Despite this variability, the continued growth in capital expenditure underscores the resilience of Japan’s corporate sector.

Impact of Japan’s Corporate Capex Growth on GDP Revision

The latest capex data is crucial for the upcoming revision of Japan’s gross domestic product (GDP) figures, scheduled for release on June 10. Preliminary GDP data indicated a 2.0 percent annualized contraction in the first quarter. However, the solid capex growth suggests that this decline might be less severe than initially reported. Takeshi Minami, chief economist at Norinchukin Research Institute, noted that the increase in capex, along with public works investment and inventory buildup, could lead to a revised GDP contraction of 1.8 percent annualized. This potential upward revision would reflect a more robust economic performance than previously estimated.

Sector-Specific Growth and Profitability

The growth in corporate capex has been accompanied by notable increases in corporate sales and profits. The MOF data revealed that corporate sales rose by 2.3 percent in the first quarter compared to the same period last year, while recurring profits surged by 15.1 percent. The total value of corporate profits reached 27.4 trillion yen, the third-largest on record. This surge in profitability has been driven by increased demand for automobiles, chemicals, real estate investments, and other services. The strong performance in these sectors highlights the underlying strength of Japan’s economy and its ability to adapt to changing market conditions.

Central Bank Policy Implications

The consistent growth in corporate capex also has significant implications for Japan’s monetary policy. The Bank of Japan raised interest rates in March for the first time since 2007, signaling a shift towards normalizing monetary policy. The continued rise in capital expenditure supports the case for further normalization, as it indicates a healthy level of private sector investment and economic activity. Analysts suggest that if this trend persists, the central bank may be more confident in proceeding with additional rate hikes in the future.


Japan’s corporate capex growth in the first quarter of 2024 offers a promising sign for the nation’s economic outlook. Despite some fluctuations, the overall trend of increased capital expenditure reflects a resilient corporate sector and robust private sector-led growth. This growth, combined with rising corporate sales and profits, suggests that the preliminary GDP figures may be revised upward, indicating a less severe economic contraction. As the Bank of Japan continues to monitor these developments, the sustained increase in capex will be a key factor in shaping future monetary policy decisions. Japan’s corporate capex growth not only highlights the country’s economic resilience but also underscores the potential for continued recovery and stability in the months ahead.

Read more: China’s May Manufacturing PMI Falls to 49.5, Signaling Economic Slowdown


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