MNI DATA IMPACT: Japan Q4 Capex Down; GDP Seen Revised Lower

Combined capital investment by non-financial Japanese companies excluding software fell 1.4% q/q in the fourth quarter of 2020, widening from -0.8% in Q3, according to a quarterly revised survey released by the Ministry of Finance on Tuesday.

Based on the MOF data on capex and inventories, the government is likely to revise down its estimate of Q4 real GDP from the preliminary +3.0% q/q, or an annualized +12.7%.

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

Capex in preliminary GDP, based solely on supply side data, rose 4.5% q/q and pushed total domestic output up by 0.7 percentage points.

Combined capital investment by non-financial companies fell 4.8% y/y in Q4, widening from -10.6% in Q3 for the third straight drop. Capex excluding software fell 6.1% y/y in Q4 vs. -11.6% in Q3.

Capital investment in the current fiscal year was revised lower on the back of the heightened uncertainty over the global economy and domestic demand caused by the coronavirus outbreak.

Combined non-financial current profits fell 0.7% y/y in Q4, improving from -28.4% in Q3. Current profits at manufacturers rose 21.9% y/y in Q4 vs -27.1% in Q3, while those at non-manufacturers fell 11.2% in Q4 vs. -29.1% in Q3.