Japan's capital spending rose at the fastest pace in a year in the third quarter, led by property developers, suggesting the government may raise its economic growth estimate.
The broadest measure of investment climbed 9.6 percent from a year earlier, the Ministry of Finance said in Tokyo yesterday. Spending by developers had the biggest increase, surging by surged 74 percent.
"The domestic demand story in Japan is still strong," said Huw McKay, senior international economist at Westpac Banking Corp in Sydney.
The government may revise its third-quarter growth estimate on Friday to an annualized 3.2 percent from the 1.7 percent announced last month, he said.
Companies such as Mitsubishi Estate Co are redeveloping properties in central Tokyo, where prices have started rising for the first time in a decade. Manufacturers such as Toyota Motor Corp are also expanding to meet export demand, supporting an economy that slowed in the third quarter because of a lull in consumer spending.
The Nikkei 225 Stock Average climbed 0.8 percent to 15,551.31 at the close in Tokyo yesterday, the highest since Oct. 10, 2000.
The yield on the benchmark 1.5 percent bond due December 2015 rose 5.5 basis points to 1.56 percent, the highest since Nov. 14.
The Cabinet Office will use yesterday's report to re-calculate capital spending in its revised estimate of GDP for the third quarter.
Capital spending, excluding software, climbed 10.6 percent from a year earlier. Sales of the companies surveyed rose 4.6 percent in the quarter from a year ago, the Ministry of Finance said. Property investment rose to ¥776.2 billion (US$6.4 billion), 6 percent of the total.
Mitsubishi Estate, Japan's second-largest developer, said on Nov. 10 that it expects to increase capital spending 9 percent to ¥87 billion in the year ending March 31. The company is redeveloping a one-square-block in front of Tokyo station as part of its nine-year plan to rebuild Marunouchi, Tokyo's main business district.
Commercial and residential real estate in the capital's 23 wards gained for the first time since 1990 in the 12 months ended July 1, the government said in September.
Toyota, Japan's largest automaker, plans to boost capital spending 12 percent to a record ¥1.4 trillion from its May forecast, as it increases production at home and overseas.
Pretax profits of the companies surveyed climbed 6.6 percent in the third quarter from a year earlier, the slowest increase since the second quarter of 2002, the Ministry of Finance said.
Profit increased 12.9 percent in the second quarter from a year earlier.
Companies are being forced to increase salaries as they search for more employees to meet increasing demand.
Wages increased for a fifth month in six in October, rising 0.5 percent from a year earlier, the Ministry of Health, Labor and Welfare said on Nov. 30.
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