Weak capital spending data raises risks of a downward revision to Japan’s Q1 GDP growth from 2.1% annualized.
Japan’s first-quarter capital expenditure rose just 0.047% year-on-year, far below the 4.0% forecast and down from 6.5% in Q4. The slowdown, including a 2.0% quarterly decline on a seasonally adjusted basis, signals potential weakness in corporate investment trends.
Excluding software, capex fell 1.4% year-on-year, missing expectations of 5.4% growth. Manufacturer spending dropped 0.4%, led by pullbacks in information and communications equipment and automotive sectors after prior capacity expansions. Despite the slowdown, nominal capex hit a record 18.8 trillion yen.
Analysts warned the data could prompt a downward revision to Japan’s preliminary Q1 GDP estimate of 2.1% annualized, with the revision due June 8. Profits rose 14.6%, exceeding forecasts, but subdued capex growth may persist amid monetary policy adjustments and geopolitical tensions.