MNI: Solid Capex Confirmed by Q1 GDP - Govt Aide

Corporate demand for capital investment has not weakened as capex rebounded sharply in Q1 from a bigger fall in the fourth quarter, a senior official at the Cabinet Office said Wednesday.

“Machinery capital investment remained weak, judging from shipments of capital goods," the official said. "But investment for software remained solid, I don’t think the underlying trend of corporate capex stance has weakened."

He noted high costs and the shortage of semiconductors impeded capex somewhat, despite solid businesses investment plans. The official, however, warned adjustments of global semiconductor prices have not bottomed. When this happens and its impact on the global economy is uncertain, he said.

Business investment unexpectedly rose 0.9% q/q in Q1, the first rise in two quarters following a revised 0.7% fall in Q4 (see: MNI BRIEF: Japan Q1 GDP Posts First Rise in Three Quarters). The median forecast was for a 0.3% fall.

Japan's economy posted the first growth in three quarters due to strong private consumption and capital investment, preliminary GDP data released by the Cabinet Office Wednesday showed. Q1 GDP rose 0.4% q/q, or an annualised 1.6% gain following a revised 0.0% q/q, or an annualised revised 0.1% fall for Q4 2022.

COVID CONSUMPTION

The official noted favorable effects from waning Covid-19 on private consumption in the Q2 may outperform Q1. Private consumption rose 0.6% q/q in Q1, thanks to the recovery of hospitality and inbound tourists. High prices somewhat impeded Q1 private consumption, the official said.

The official added high prices have pushed real incomes into negative territory, but considerable wage hikes are widely expected this year. Steady wage growth will help keep consumer sentiment positive and support spending. The official said private consumption has shifted toward the recovery phase from Covid-19.