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Economy
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2000-06-07 16:11:00-04
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Japanese Firms increase Capital Spending
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Spending on new plants and equipment in first quarter a signal that economy may be coming out of slide
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The Japanese Ministry of Finance has reported that Japanese firms increased first quarter spending on new plants and equipment giving rise to expectations that the lagging Japanese economy has snapped out of the doldrums. The ministry said that firms increased capital spending in the first quarter by 3.3% over year earlier, exceeding forecasts.
The increase was the first in nine quarters and beat estimates of a fall of 1.6% to an increase of 0.75%. Analysts are rejoicing as they see improved capital spending as being the first step of a demand-led recovery. Most observers expect a full economic recovery in the second half of the fiscal year. The cloud hanging over the economy remains weak personal spending. The lack of personal spending is the result of near-record unemployment, corporate downsizing and persistent concern about future pension payments, as Japan has an extraordinarily aging population. The Bank of Japan will be watching how the corporate recovery translates to individual households. The central bank says a bottoming out in personal incomes will trigger the first interest rate hike in a decade. The central bank has been emphasizing its impatience with continuing the near-zero rate interest level, which was put in as a 'temporary' measure in February, 1999.
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