Japan Q4 Capital Spending Rises More than Estimated

Japanese companies' spending on plant and equipment was unchanged from a year earlier in Q1 2026, reversing from a 6.5% increase in the previous quarter and ending a four-quarter streak of growth, signaling a loss of momentum in corporate investment. Capital expenditure in the manufacturing sector declined 0.4% after being flat in Q4, weighed down by lower spending in chemical products (-2.9%), fabricated metal products (-25.2%), business-oriented machinery (-8.6%), information and communication (-18.5%), and transport equipment (-7.6%). Meanwhile, non-manufacturing investment edged up 0.3%, supported by gains in wholesale and retail trade (2.1%), goods rental and leasing (37.6%), information and communication (6.2%), transport and postal activities (0.4%), and electricity production, transmission, and distribution (18.0%). The mixed performance suggests firms remained selective in their investment plans amid an uncertain economic environment.

Japanese companies increased capital spending by 6.5% in Q4 2025, sharply picking up from 2.9% in the previous period and exceeding market expectations of 3.0%. The latest result marked the fourth straight quarter of growth, reflecting stronger corporate confidence. Non-manufacturing investment significantly accelerated (10.1% vs 3.9% in Q3), boosted by a solid rebound in construction (14.9%) and further gains in real estate (40.7%), goods rental and leasing (26.0%), and services (2.5%). In contrast, manufacturing outlays stagnated following a 1.4% growth previously, as gains in food(13.6%), chemical products (18.7%), iron and steel (13.4%), and fabrucated metal products (25.5%) offset declines in petroleum and coal (-14.9%), production machinery (-6.7%), and information and communications (-38.2%).

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%).