Japan Q4 Capital Spending Rises More than Estimated

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%).

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.