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3d ago

Japan’s Q1 Corporate Capital Spending Reaches Record as Economy Contracts

Sectors serving domestic consumers have driven spending gains against a backdrop of export-focused industries reducing investment over U.S. tariff uncertainty.

Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration/File photo
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Overview

  • Corporate capital spending on plants and equipment rose 6.4% year-on-year to 18.8 trillion yen in the first quarter.
  • Food sector outlays climbed 13%, and real estate investment increased 11% as firms responded to strong domestic demand.
  • Export-focused industries cut spending, with auto sector capex down 1.4% and factory equipment investment falling 4.1% as firms cite U.S. tariff uncertainty.
  • Japan’s GDP shrank an annualized 0.7% in Q1 due to stagnant private consumption and declining exports.
  • Analysts warn threatened U.S. tariffs could reduce exports by up to 6 trillion yen annually and trim corporate profits by as much as 25%, threatening wage growth.