MNI BRIEF: Japan Q4 Capex Up Q/Q But GDP Seen Revised Lower

Combined capital investment by non-financial Japanese companies excluding software rose 0.3% q/q in the fourth quarter of 2022, slowing from 2.6% in Q3, a quarterly survey released by the Ministry of Finance Thursday showed.

The MOF survey, based on the demand side, is the key to calculating Q4 GDP revisions (due March 9) and indicated that capex will be revised down from preliminary estimate of -0.5%.

Based on the MOF data on capex and inventories, the government is likely to revise down from its estimate of Q4 real GDP from the preliminary 0.2% q/q, or an annualised 0.6%. Combined capital investment by non-financial companies including software rose 0.5% q/q in Q4 after rising 2.3% in Q3.

Capital investment plans in the current fiscal year remained solid on the back of high corporate profits, according to the Bank of Japan’s Tankan business sentiment survey.

Combined non-financial current profits fell 2.8% y/y in Q4, for the first drop in eight quarters and down from a rise of 18.3% in Q3. Current profits at manufacturers fell 15.7% y/y in Q4 vs a rise of 35.4% in Q3, while those at non-manufacturers also rose 5.2% in Q4 vs. 5.6% in Q3. Capex excluding software rose 7.7% y/y in Q4, down from a rise of 9.8% in Q3.