Japanese firms set to invest more despite sales-tax slump
Japanese companies increased their investment plans more than forecast even as a sales tax rise dented sentiment, potentially aiding Prime Minister Shinzo Abe's effort to stoke an economic recovery.
Japanese companies increased their investment plans more than forecast even as a sales tax rise dented sentiment, potentially aiding Prime Minister Shinzo Abe's effort to stoke an economic recovery.
Large companies across all industries plan to lift capital spending 7.4 per cent in the fiscal year to March, more than the 0.1 per cent increase they signalled three months earlier, a Bank of Japan report showed yesterday.
That was above a median 6 per cent gain forecast in a survey of 22 economists.
A gauge of sentiment among large manufacturers fell to 12 from 17 in March.
Abe is counting on companies to use record cash holdings to boost investment and wages, as consumers feel a crunch from inflation. It is growing five times faster than income as the Bank of Japan pumps record stimulus.
Capital expenditure remains well below a 2007 peak, underscoring Abe's intention to create incentives for corporate spending at home.
Resilience in the corporate sector would help buttress an economy estimated to have contracted in the past quarter as the sales tax increase crimped consumption.
The strength of the economy in the third quarter will be a key factor in a decision whether to increase the levy by two more points next year.
The combination of the higher tax and inflation spurred by the central bank's easing has squeezed households.
Overall consumer prices rose 3.7 per cent in May from a year earlier, while overall pay increased 0.7 per cent in April, government data shows.
Household spending fell 8 per cent in May, about three times more than the median estimate of economists surveyed.
