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Rise in Japan's Q1 capex undercut by profit slump

by Jonathan Dryer (2020-06-06)

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By Daniel Leussink

TOKYO, June 1 (Reuters) - Japanese firms raised spending on plant and equipment in the first quarter, a survey showed on Monday, though a sharp decrease in profits underlined the widening economic impact of the coronavirus outbreak.

Capital spending rose 4.3% in the first quarter year-on-year, following a 3.5% decline in the final three months of 2019, lifted by demand for electrical machinery, a preliminary survey by the Ministry of Finance (MOF) showed on Monday.

On a seasonally-adjusted basis, capital expenditure gained 6.7% quarter-on-quarter in January-March.

However, corporate recurring profits also decreased sharply at their fastest pace in over a decade, the survey showed, backing recent data showing the pandemic's sweeping impact.

Japan's economy slipped into recession for the first time in 4-1/2 years in the last quarter, putting the nation on course for its deepest postwar slump.

The data will be used to calculate revised gross domestic product figures due June 8 - the initial estimate showed the economy shrank an annualised 3.4% in January-March.

The latest MOF survey drew fewer respondents than usual, tour sapa with the participants' ratio at 62.3%, as the pandemic forced many businesses to close, the ministry said.

As such, the ministry will be revising the data about two months later by extending the May 10 deadline for respondents by two months, it said.

Manufacturers' business spending rose 0.6% from a year earlier, according to Monday's survey, conducted among firms with capital ranging from 10 million yen to 1 billion yen or tour sapa more. It followed a 9.0% drop in the previous quarter.

Corporate recurring profit tumbled 32.0% in the January-March quarter from a year earlier, the biggest drop since July-September 2009, due to declining demand for cars and other transportation goods.

Sales dropped 3.5% year-on-year in January-March, down for the third straight quarter and followed the fourth quarter's 6.4% decline.

(Reporting by Daniel Leussink; Writing by Tetsushi Kajimoto; Editing by Sam Holmes)

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