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Combined capital investment by non-financial Japanese companies excluding software fell 0.7% q/q in the first quarter of 2021, narrowing from -1.5% in Q4, according to a quarterly survey released by the Ministry of Finance on Tuesday.

The MOF survey, based on the demand side, is the key to calculating Q1 GDP revisions (due June 8) and indicated that capex will be revised up from the preliminary estimate of -1.4%, which had pushed total domestic output down by 0.2 percentage points.

Based on the MOF data on capex and inventories, the government is likely to revise up its estimate of Q1 real GDP from the preliminary -1.3% q/q, or an annualized -5.1%.

Combined capital investment by non-financial companies excluding software fell 7.8% y/y in Q1, widening from the 4.8% fall in Q4, for the fourth straight quarterly drop.

Capital investment plans in the current fiscal year remained solid, according to the Bank of Japan's Tankan business sentiment survey.

Combined non-financial current profits rose 26.0% y/y in Q1, reversing from -0.7% in Q4. Current profits at manufacturers surged 63.2% y/y in Q1 vs +21.9% in Q4, while those at non-manufacturers rose 10.9% in Q1 vs. -11.2% in Q4.