Japan Q3 Capital Spending Rises Less than Expected

Japanese companies increased capital spending by 2.9% in Q3 2025, sharply slowing from 7.6% in the previous period and missing market expectations of 5.9%. The latest result marked the slowest rise in three quarters amid weaker manufacturing investment, softer overseas demand, and the impact of rising U.S. tariffs. Manufacturing investment weakened sharply (1.4% vs 16.4% in Q2), dragged down by declines in chemical products (-0.6%), production machinery (-3.0%), and information and communication equipment (-43.2%). In contrast, non-manufacturing outlays accelerated (3.9% vs 3.0%), supported largely by solid gains in real estate (14.2%), goods rental and leasing (13.8%), and information and communication services (26.8%).

Japanese companies increased capital spending on plant and equipment by 7.6% in the second quarter of 2025, accelerating from 6.4% in the previous quarter and surpassing market expectations of 6.2%. The growth was broad-based, with both manufacturing and non-manufacturing sectors contributing to the expansion. Investment in the manufacturing sector surged 16.4%, driven by strong spending across key industries, while the non-manufacturing sector posted a more modest 3% rise. Among individual industries, the largest gains were recorded in petroleum and coal products (49.1%), transportation equipment (43.4%), food (38.2%), iron and steel (37.2%), and production machinery (35.8%). The robust pace of capital investment underscores renewed corporate confidence and suggests stronger support for Japan’s broader economic recovery momentum in the months ahead.

Capital expenditure by Japanese companies rose sharply in the first quarter of 2025 ahead of the imposition of US tariffs, climbing 6.4% year-on-year. This marks a strong rebound from the 0.2% decline recorded in the previous quarter and significantly surpasses market expectations for a 3.8% increase. The growth was broad-based, with both manufacturing and non-manufacturing sectors contributing to the upswing. Capital spending in the manufacturing sector rose by 4.2%, while the non-manufacturing sector posted a stronger gain of 7.6%. Among individual industries, the largest increases were seen in petroleum and coal products (+33.3%), information and communications (+25.2%), iron and steel (+21.8%), transport and postal services (+19.3%), and food (+13.1%). The robust capital investment signals renewed corporate confidence and may support Japan’s broader economic recovery momentum.