Japanese Minister of Finance Taro Aso trumpeted bright economic news yesterday as figures showed firms were ramping up investment in a possible sign that government stimulus was working.
“Capital spending will increase from now on,” Aso told reporters after official data showed core machinery orders soared 14.2 percent on-month in March.
The jump is the highest increase since April 2005 when comparable data started to be collected.
Core orders are regarded as a leading indicator of corporate capital spending. Economists say movements in the figure may reflect the outlook for the broader economy.
The data is good news for Japan’s aggressive-spending government, who have unleashed a vast stimulus plan intended to help turn around an economy that has been treading water for years.
It came the day after the Cabinet Office said the economy expanded by 0.9 percent on quarter in the three months to March, giving a respectable annualized growth rate of 3.5 percent.
The government said in a report yesterday that machinery orders were showing “moves of a gradual recovery,” but figures show it expects core orders to fall 1.5 percent quarter-on-quarter in the period from last month to next month.
Some observers say the numbers over the last few days, along with a roaring stockmarket and a sliding yen, are proof that Japanese Prime Minister Shinzo Abe’s bid to light a fire under the economy is working.
The stock market is up about 70 percent since late last year, while the yen has lost around a quarter of its value over the same period.
While the mood in corporate Japan and among consumers has taken a positive turn, some observers say it is too soon to tell if Abenomics will have a long-term effect.
“A real recovery in domestic demand will not come until Japan achieves between 2 percent and 3 percent economic growth for several years and overcomes deflation. It is too early to expect a revival of domestic demand now,” said Takeshi Minami, economist at the Norinchukin Research Institute.
Analysts say Japan needs to put some flesh on its policy bones if it is to move beyond the initial rush of enthusiasm for “Abenomics,” as eyes were turned to a speech the prime minister was scheduled to give later yesterday.
“We will work on measures to promote more corporate capital investment, the core of private investment that would contribute to economic growth,” Japanese Trade and Industry Minister Toshimitsu Motegi told reporters yesterday.
The plans also include a target of tripling sales of Japanese infrastructure technology in overseas markets to ￥30 trillion (US$290 billion) by 2020, with Abe taking on the role of traveling salesman-in-chief for Japan Inc, NHK said.