Japan Capital Spending Falls in Challenge for Abe’s Campaign

Japanese companies’ capital spending fell 5.2 percent in the first quarter from a year earlier, underscoring the challenge the government faces in sustaining momentum in the world’s third-biggest economy.

The decline in spending excluding software compared with a 7.2 percent slide in the previous quarter, a Ministry of Finance report showed in Tokyo today. The median forecast of six economists surveyed by Bloomberg News was for a 5.5 percent decrease. Investment fell 0.9 percent from the prior quarter, according to the report.

Campaigning to boost company outlays and wages through fiscal and monetary stimulus and a loosening of business regulations, Prime Minister Shinzo Abe needs to sustain confidence amid weakness in the global economy and volatility in Japanese stock and bond markets. Abe has pledged to restore annual private investment to the 70 trillion yen ($695 billion) level before the 2008 financial crisis.

“Companies are not confident in the economic outlook as we haven’t seen a clear signal of a solid global recovery,” Daiju Aoki, a Tokyo-based economist at UBS AG. said. “This will pressure the Abe government to come up with measures to support businesses in the growth strategy” due this month, he said.

The Nikkei 225 Stock Average fell 2.4 percent as of 10:54 a.m. after dropping 5.7 percent last week. The yen was down 0.1 at 100.56 per dollar.

Company profits rose for a fifth quarter, up 6 percent from a year earlier, today’s report showed, while sales fell 5.8 percent, down for a fourth quarter.

A second reading of first quarter gross domestic product is due next week, after the first showed Japan’s economy expanded at the fastest pace in a year as plans for monetary easing weakened the yen and boosted stocks. GDP may be revised down slightly on public investment, with today’s report suggesting that the estimate of capital spending may be unchanged, said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo.

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