Japan Capital Spending Rise Pauses In Jan.-March, Iran War Clouds Outlook

TOKYO, June 1 (Bernama-Kyodo) -- Capital spending by Japanese companies in the January-March quarter was almost flat from a year earlier, in a sign that growth led by artificial intelligence-linked investment has slowed, government data showed Monday, as the West Asia conflict further clouds the outlook, Kyodo News reported. 

Investment by all nonfinancial sectors for purposes such as building plants and purchasing equipment edged up 0.047 per cent from a year earlier to 18.81 trillion yen (US$118 billion), a record-high, for the fifth straight quarterly gain, the Finance Ministry said.

Declines in the manufacturing sector, including information and communication electronics equipment, were offset by gains among non-manufacturers led by goods rental and leasing, the data showed.

A Finance Ministry official said that for the latest data, no significant impact from the West Asia conflict was observed, but added that the government will continue to closely monitor developments as well as movements in the financial markets.

Tensions in West Asia have disrupted oil supply and petroleum products to the resource-poor country amid the effective closure of the Strait of Hormuz, with economic indicators showing consumer sentiment worsening.

The United States and Israel launched attacks on Iran on Feb. 28.

In the first quarter of 2026, pretax profits jumped 14.6 per cent to 32.63 trillion yen, logging a rise for the sixth straight quarter, with profits by manufacturers of memory and other semiconductor-related devices surging 174.7 per cent from a year earlier, it said.

Sales gained 1.1 per cent to an all-time high of 408.66 trillion yen (US$2.79 billion), on the back of robust manufacturing demand for AI, data centres, and factory automation, it said.

The latest figures will be used to revise Japan's gross domestic product data for the January-March period, which showed the economy grew an annualised real 2.1 per cent, marking the second straight quarterly expansion.

Based on the latest data, Takeshi Minami, chief economist at the Norinchukin Research Institute, said he estimates that the Cabinet Office's revised GDP data, to be released on June 8, will likely show a cut in economic growth to an annualised 1.3 per cent due to a larger fall in private investments.

"For the April-June period, economic growth will likely slow down as the West Asia conflict deteriorates consumer sentiment and is expected to weigh on exports, even as real wages are rising from the year earlier on a slowdown in the increase in consumer prices," he said.

-- BERNAMA-KYODO