Sudden surge in capex boosts Japan’s economy

By: Reuters | Tokyo | Published:June 10, 2014 1:38 am

Japan’s first quarter growth handily beat initial estimates on an unexpected surge in capital spending, fresh signs the world’s third-biggest economy is in better shape to weather a hit to consumption from a sales tax hike.

Capital spending, long a weak link in the economy, is a key focus in Tokyo’s campaign to engineer a revival after two decades of sub-par growth and grinding deflation.
“Companies don’t tend to ramp up spending ahead of the sales tax hike, so the increase likely reflects improvements in corporate profits and diminishing slack,” said Mitsumaru Kumagai, chief economist at Daiwa Institute of Research.

Japan’s economy grew an annualised 6.7 per cent in the first quarter, data showed on Monday, up sharply from an initial reading of a 5.9 per cent rise, and confirmed the fastest pace of growth since July-September 2011. The data beat the median market forecast for GDP to rise 5.6 per cent.

The upward revision was largely due to a recalculation in capital expenditure that took into account finance ministry data showing a solid increase in spending. Adding to the optimism, current account data showed foreign visitors spent more money than Japanese traveling abroad for the first time in 44 years, boding well for Japanese companies in the retail and tourism industry.

Japanese consumer confidence rose for the first time in six months in May, further underscoring recent signs that the economic pain from the sales tax hike would be temporary.

World markets inch to all-time high

LONDON: World stock markets pushed higher on Monday, bringing many stock indexes to all-time highs amid optimism over global growth.    Since the end of last week, investors have been digesting news of a raft of stimulus measures from the European Central Bank that included a cut in the main interest rate to a record low, as well as another solid US jobs report that showed a 217,000 increase in payrolls in May.
“In the aftermath of the ECB’s policy measures last Thursday and a decent US jobs report on Friday, the mood in the financial markets remains positive,” said Neil MacKinnon, global macro strategist at VTB Capital. In Europe, the FTSE 100 index of leading British shares rose 0.2 percent to close at 6,875 while Germany’s DAX rose 0.2 percent to 10,008.63, a record high closing price.     (AP)

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