5 September 2001, 08:52 Japan's MoF says Q2 capex surprisingly solid, outlook severe
TOKYO (AFX-ASIA) - The Ministry of Finance said three months to
June overall capital expenditure was surprisingly solid, led by the
manufacturing sector as well as a reduction in the decline in
non-manufacturing spending.
However, a ministry official warned that declining sales in the
manufacturing sector are likely to impact on investment spending going
forward, with conditions here expected to be severe.
The ministry had expected capex to show further signs of a slowdown
from April, but overall capex rose 2.3 pct in the second quarter, down
only slightly from the 2.5 pct rise the previous quarter.
"It seems to me that strong sentiment in capex continued into the
second quarter," the ministry official said.
"Many people think the capex rise in the second quarter was
unexpected but reported deterioration is taking place now (in the
current quarter)," he said.
The official declined to comment precisely on the outlook for capex
but said it is expected to be severe, given the trend in manufacturing
sales.
"Manufacturers' sales figures this quarter showed negative growth.
We expect this will reflect on the overall outlook for capex," he said.
Sales in the manufacturing sector fell 1.6 pct in the second
quarter, compared with a rise of 0.7 pct in the first.
Non-manufacturing sales rose 2.5 pct, compared with a rise of 3.7 pct.
Capex in the electric machinery sector rose 17.8 pct in the second
quarter, compared with a rise of 30.4 pct in the previous quarter,
while service sector capex rose 2.8 pct, compared with a fall of 14.3
pct.
On the other hand, profits in non-manufacturing started to show
some recovery, led by the positive impact of restructuring efforts
here. However, this contrasts with profit declines in the manufacturing
sector.
"Pretax profit in manufacturing has become negative due to the
electric machinery sector but the non-manufacturing sector has started
to show some growth led by restructuring efforts, especially in
services," the official said.
Service-sector profit rose 36.9 pct in the second quarter compared
with a 30.2 pct fall in the first, while electric machinery-sector
profit fell 88.6 pct compared with a fall of 1.6 pct.
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