Japanese companies' capital spending in the three months to June chalked up the highest growth in two and a half years, official data showed Thursday, attesting to growing signs of an economic recovery.
Another survey by the finance ministry showed widespread improvement in business sentiment last month, although firms with a pessimistic view of their operating conditions still outnumbered those who said they were optimistic.
The upbeat data helped the yen appreciate further into the ¥115 to the US dollar range before suspected intervention by the Japanese authorities reined it in.
The finance ministry said private capital investment rose 6.4 percent from a year earlier, reversing a revised 3.0 percent decline in the January to March quarter.
It is the highest growth since 7.1 percent in the October to December quarter of 2000. Corporate investment in plant and equipment last rose on a year-on-year basis in July to September last year.
"Capital spending has been said to be recovering for some time now ... but the margin of growth was bigger than expec-ted," said Akihiko Suzuki, senior economist at UFJ Institute.
The data showed "companies stepped up capital investment with the advent of the new fiscal year [in April] amid growing expectations that the economy is getting on a recovery path," he said.
The higher spending is likely to result in an upward revision to April to June GDP, already put at a surprisingly strong 0.6 percent from the previous quarter in a preliminary report, Suzuki said.
Tax cuts on capital spending and research and development costs also contributed to the higher investment, he added.
"As companies are front-loading their capital investment plans ... the July to September data are also likely to be strong," Suzuki said.
"It is unclear, however, what will happen next ... I think the economy is not strong enough to make companies upgrade their investment plans," he said.
Capital spending is likely to keep growing "but the pace may slow," he said.
In the June quarter, capital investment by manufacturers rose 3.8 percent against a 5.5 percent drop in the previous three months.
Non-manufacturers' capital spending climbed 7.7 percent against a 1.9 percent dip in January to March.
The survey is based on surveys of 19,528 companies capitalized at ¥10 million (US$86,000) or more, excluding financial institutions.
The poll also showed all-industry sales rose 2.4 percent in the April to June period, a turnaround from a drop of 1.4 percent and the first year-on-year rise in eight quarters.
Parent-level recurring profit rose 13.6 percent, compared with a rise of 10.0 percent in the three months to March.
The set of latest data "enables us to say the economy has hit bottom," said Toshio Sumitani, economist at Tokyo Tokai Research Center.
"The manufacturing sector had been the sole engine [for the Japanese economy] but the non-manufacturers' performance is now on the upturn," he said.
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