MNI BRIEF: Japan Q2 Capex Down Q/Q; GDP Seen Revised Lower

Combined capital investment by non-financial Japanese companies excluding soft-ware fell 1.6% q/q in Q2 2023, decelerating from Q1's 2.8% in Q1, a quarterly survey released by the Ministry of Finance showed on Friday.

The MOF survey, based on the demand side, is the key to calculating Q2 GDP revisions due Sept 8. The results indicate capex will be revised down from the preliminary estimate of 0.0%, based solely on supply side data. Based on the MOF data on capex and inventories, the government will likely revise down its estimate of Q2 real GDP from the preliminary 1.5% q/q, or an annualised 6.0%.

Combined capital investment by non-financial companies including software fell 1.2% q/q in Q2 after rising 2.4% in Q1. Capital investment plans in the current fiscal year remained solid on the back of high corporate profits, according to the Bank of Japan’s June Tankan business sentiment survey.

BOJ economists will focused on capex plans revisions in the September Tankan survey due Oct 2.

Combined non-financial current profits rose 11.6% y/y in Q2 following 4.3% in Q1. Manufacturing profits rose 0.4% y/y in Q2 vs -15.7% in Q1, while those at non-manufacturers also rose 19.0% in Q2 vs. 17.2% in Q1.