Japan Q4 Capital Spending Rises More than Estimated

Japanese companies’ spending on plant and equipment rose 1.6% year-on-year in Q2 2026, rebounding from a flat reading in the prior period and comfortably exceeding market expectations of 0.2%. Non-manufacturing spending accelerated (4.7% vs 0.3% in Q1), boosted by gains in services (25.9%), goods rental and leasing (24.9%), electricity production, transmission and distribution (18.2%), and transport and postal activities (0.4%). In contrast, manufacturing investment remained weak, falling 3.7%, after a 0.4% decline in Q1. Spending dropped sharply in information and communication (-29.3%), petroleum and coal products (-26.1%), general-purpose machinery (-22.5%), transport equipment (-17.0%), and production machinery (-2.3%). Overall, the data suggest corporate investment gained momentum in Q2, although manufacturing remained constrained by softer capital spending in several key industries.

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%).