By Makiko Yamazaki
TOKYO (Reuters) – Japanese corporate spending on plant and equipment rose 8.1% year-on-year in the third quarter, Ministry of Finance data showed on Monday, signalling that solid domestic demand was underpinning the country’s fragile economic recovery.
The solid expenditure data, which will be used to calculate revised gross domestic product figures due on Dec. 9, could support the case for the central bank to raise interest rates further.
Preliminary data last month showed Japan’s economy expanded by an annualised 0.9% in the third quarter, slowing from the previous three months.
The third-quarter capital spending figures compared with the previous quarter’s 7.4% gain. It grew 1.7% on a seasonally adjusted quarterly basis.
Monday’s capex data also showed corporate sales rose 2.6% in the third quarter from a year earlier, while recurring profits decreased 3.3%.
Capital expenditure is one of the key gauges of domestic demand-led economic growth.
Business spending remained generally solid in recent years due to strong appetite for investment in information technology.
However, an unstable political situation at home and further weakness in China’s economy could lead Japanese firms to postpone capital investment decisions, economists said.
Moreover, U.S. President-elect Donald Trump has pledged tariffs on the nation’s three largest trading partners – Canada, Mexico and China, potentially affecting global supply chains in a wide range of industries.