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Japan's Q2 capital spending slows to 5.6 pct on quarter, company profits surge

Xinhua, September 1, 2015 Adjust font size:

Capital spending by firms in Japan increased 5.6 percent on quarter in the April-June period of 2015, the Ministry of Finance said in a report released on Tuesday.

However, the figure was a drop from the 7.3 percent pace logged in the first quarter and well down on median economists' forecasts for an 8.8 percent increase, according to the ministry.

Not including firms' outlays on software, capital expenditure in this segment, which accounts for 90 percent of Japan's total, gained 6.6 percent in the second quarter, down from 8.1 percent logged in the previous quarter, the ministry said, with the latest figure coming in below median analysts' predications for an increase of 10.9 percent.

In addition, the government statistics also showed that company profits had surged 23.8 percent in the recording period, from a 0. 4 percent uptick in the previous quarter, far exceeding median forecast for a 2.2 percent rise. Meanwhile, company sales added 1. 1 percent in the second quarter, following a 0.5 percent retraction in the previous quarter.

Local analysts were of the opinion that following the slowdown in capital spending since the beginning of the year, it was now likely that the Cabinet Office would downwardly revise its second quarter GDP data, which is scheduled to be released on Sept. 8.

Capital spending in Japan, according to the Finance Ministry, refers to spending by companies for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. This is distinct from capital expenditure, which is payments made in cash or cash equivalents over a period of more than one year.

Capital expenditures are often used by firms to acquire assets or improve the "useful life" of existing assets. For accounting purposes, capital expenditures must be capitalized, meaning the expenditure is recognized on a balance sheet gradually over the course of an asset's useful life.

Capital expenditures are recorded as liabilities on a balance sheet and they are also sometimes referred to in the industry as capital outlays. Endi