Japan’s Q2 capital expenditure grows slowest in 18 months, company profits fall

Japan’s capital expenditure grew at the slowest pace in 18 months during the second quarter, undershooting market expectations and adding fresh pressures on the central bank policymakers for additional steps to boost the ailing economy.

Japan’s c expenditure rose 3.1 percent from a year earlier versus the 5.5 per cent forecast by economists, while company profits slumped 10.0 percent during the second quarter, with sales sliding 3.5 percent.

Moreover, capital spending excluding software rose 3.1 percent year-on-year in the second quarter, down from 4.3 percent growth in the first three months of this year and economists’ expectations it would rise to 5.5 percent.

The yen's resurgence this year has made business reluctant to ramp up spending, even after making strong profits in the early years under Prime Minister Shinzo Abe when the currency was moving in their favor.

Meanwhile, Japan’s annualized pace of 0.2 percent economic growth in the second quarter, down from 2 percent annualized pace in the first three months of this year, could posit downside risk in subsequent revisions to the 2Q GDP number and will keep pressure on the BoJ to consider boosting its monetary stimulus efforts at this month’s policy meeting.