Roundup: Japan's July-Sept capital spending leaps 11.2 pct, possibility of GDP upgrade raised

Capital spending in Japan increased at the fastest pace in eight years in the July to September period and a government report on Tuesday showed in a sign the nation's gross domestic product may see an upward revision.

According to the Finance Ministry, spending by Japanese companies surged 11.2 percent in the three-month period from a year earlier, compared to a 5.6 percent annual gain in the April-June quarter, which marks the largest increase since the first quarter in 2007.

The data will be a boon for the government that said the economy contracted an annualized 0.8 percent in the July-September quarter, owing to a slump in business spending and inventories.

The latest data could lead to an upgrade in Japan's revised third quarter GDP reading to be released next week, although some analysts have pointed out that a similar situation in 2014 actually proved the technical recession was deeper than initially thought, owing to differing readings of investment data by the Cabinet Office and the Finance Ministry.

Following record earnings by companies here prior to Japan slipping into recession, Prime Minister Shinzo Abe had hoped that increased capital expenditure would lead to a healthier job environment including broad scale wage hikes and hence an increase in consumer and household spending.

But the latest GDP data revealed a circumspect picture and companies unwilling to spend owing to a tenebrous economic outlook, compounded by a woeful demographic situation and doubts over the government's hazy structural reform policies.

The capital expenditure data, while painting a somewhat brighter picture, has, however, been met with mixed views by economists.

While Norio Miyagawa, a senior economist at Mizuho Securities, noted that initial GDP estimates would likely have to be revised to show a slight growth, Yoshiki Shinke, an economist at Dai-ichi Life Research Institute, said that while the data was compelling, it was "too early" to say that Japan's economy had bottomed out.

Other economists pointed out that downside risks still remained from a slowdown in emerging economies, which could cause Japanese companies to once again tighten their purse strings.

The data showed that business investment by all non-financial sectors totaled 10.49 trillion yen (85 billion U.S. dollars), with overall spending gaining a seasonally-adjusted 5.4 percent from the previous quarter, after dropping 2.7 percent in the April-June period, with corporate profits increasing 9 percent, compared to the same period a year earlier, less than the 23.8 percent annual increase logged in the previous quarter.

The likely-to-be-revised economic growth figures for the latest quarter will be released by the Cabinet Office on Dec. 8. Enditem