MNI DATA BRIEF: Japan Q2 Capex Up; GDP Seen Revised Higher

Combined capital investment by non-financial Japanese companies excluding software rose 3.2% q/q in the second quarter of 2021, widening from +0.5% in Q1, a quarterly revised survey released by the Ministry of Finance on Wednesday showed.

Based on the MOF data on capex and inventories, the government is likely to revise up its estimate of Q2 real GDP from the preliminary +0.3% q/q, or an annualized +1.3%. The MOF survey, based on the demand side, is the key to calculating Q2 GDP revisions (due Sept. 8) and indicated that capex will be revised up from preliminary estimate of +1.7%.

Combined capital investment by non-financial companies excluding software rose 3.6% y/y in Q2, improving from -9.9% in Q1, for the first rise in six quarters. Capital investment plans in the current fiscal year remained solid on the back of firm corporate profits, according to the Bank of Japan's Tankan business sentiment survey.

Combined non-financial current profits surged 93.9% y/y in Q2, widening sharply from +26.0% in Q1. Current profits at manufacturers surged 159.4% y/y in Q2 vs +63.2% in Q1, while those at non-manufacturers rose 64.2% in Q2 vs. +10.9% in Q1.