Japan’s latest Ministry of Finance corporate survey showed a sharp slowdown in capital expenditure growth in the third quarter, even as company profits surged.
- Business spending rose 2.9% y/y, well below expectations of around 6% and down from 7.6% in Q2.
- Capex excluding software also increased 2.9%, missing forecasts and marking a clear deceleration.
- Corporate sales were broadly flat, up just 0.5% y/y, only marginally above estimates.
- The standout surprise came from profitability: company profits jumped 19.7% y/y, far exceeding expectations of 3.7% and rebounding from just 0.2% previously.
- The divergence, weak investment but strong earnings, highlights a cautious corporate stance amid economic uncertainty, despite healthier bottom-line performance.
The data will feed directly into GDP revisions and will be closely scrutinised ahead of the Bank of Japan’s December meeting, with policymakers watching for signs of durable investment momentum.
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In summary:
- Q3 capex +2.9% y/y, far below 5.9% expectations and down from 7.6% prior.
- Capex ex-software also +2.9%, missing 5.4% forecast.
- Company profits surged 19.7% y/y (vs 3.7% expected).
- Company sales +0.5% y/y, slightly above estimates.
