Japan Q3 corporate capital spending jumps; profit and sales fall

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TOKYO (Dec 2): Japanese companies raised their spending on plants and equipment during the July to September period for the 12th consecutive quarter, a rare bright spot for an economy weakened by falling demand.

Official data on Monday showed firms boosted capital spending including software investment by 7.1% in the third quarter from the same period a year earlier, underlining its resilience as manufacturers' expenditure gained.

However, on a seasonally adjusted basis, capital expenditure slipped 0.8% from the previous quarter. Corporate profit and sales fell on year as firms felt the pain from a prolonged Sino-U.S. trade war and slowing growth of China's economy.

The data will be used to calculate revised third-quarter gross domestic product figures due on Dec. 9.

A preliminary reading out last month showed the world's third-largest economy ran to a near halt during July to September with growth at its weakest in a year as the China-U.S. trade conflict and soft global demand lowered exports.

A string of gloomy data since then has fuelled speculation the government may put together a large-scale economic stimulus package with fiscal spending exceeding $92 billion to keep the economy's fragile recovery intact.

Retail sales tumbled at their fastest pace in more than 4-1/2 years in October, while factory output posted its biggest fall since early 2018, exposing widening cracks in an economy that faces weakening foreign and domestic demand.

The government moved forward with a twice-delayed sales tax hike, raising the levy to 10% from 8% on Oct. 1 to fix the industrial world's heaviest public debt burden.

The previous tax hike from 5% in April 2014 dealt a blow to private consumption and triggered a deep downturn in the broader economy.

Capital expenditure, however, has been a bright spot as companies replace old equipment and ramp up automation investment to offset a labour market that remains close to its tightest in 45 years as the country's population ages.

Manufacturers' business spending jumped 6.4% from a year earlier, Monday's data showed, rebounding after a 6.9% drop in the previous quarter, while that of non-manufacturers advanced 7.6%, outpacing the second quarter's 7% rise.

Corporate recurring profit dropped 5.3% during the July to September period from a year earlier, falling for the third time in four quarters.

Sales lost 2.6%, down for the first time in three years as businesses struggled with weakening demand, and slowing from the previous period's 0.4% gain.