Japan's Capital Spending Up For 11th Straight Quarter

Capital spending by Japanese companies jumped by 9.5% in the three months to December from a year earlier, the 11th straight positive quarter, a government survey showed March 6. The year-on-year figure was slightly slower than the 9.6% rise seen in the three months to September.

Manufacturers boosted capital expenditure by 16.1% and non-manufacturers by 6.3%. Manufacturers' pretax profits rose 17.7%, while those of non-manufacturers were up 6.1%.

Japanese firms have been boosting spending on plant and equipment to meet rising consumer demand.

After a decade-long slump, the world's second largest economy appears to have finally snapped out of its deflationary doldrums with annualized growth of 5.5% in the fourth quarter of 2005. However, analysts said that that figure might be downgraded next week following the slightly softer capital spending data.

Seiji Shiraishi, chief market economist at Daiwa Securities SMBC, expects Gross Domestic Product (GDP) growth to be revised down to show an annualized rate of 5% but added there was little cause for concern. "The likely downward revision in capital investment means that Japanese companies are still cautious in recklessly boosting investment even at a time when they are enjoying healthy profit and sales growth, which will make the ongoing recovery of capital investment more sustainable," Shiraishi said.

Copyright Agence France-Presse, 2006

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