* Q1 capex +7.4 pct yr/yr, +3.1 pct qtr/qtr
* Recurring profits +20.2 pct yr/yr, sales +5.6 pct yr/yr
* MOF data shows business investment climate is solid
* Revised GDP data due 8:50 a.m. June 9 (2350 GMT June 8)
By Stanley White
TOKYO, June 2 Japan's companies raised capital
expenditure in January-March for a third straight quarter,
suggesting that revised data will show the economy maintained
its fastest growth in more than two years.
The 7.4 percent year-on-year rise in capital expenditure
followed a 4.0 percent increase in the previous quarter, finance
ministry data showed on Monday.
Compared with the previous quarter, capital spending
excluding software rose a seasonally adjusted 3.1 percent, the
third straight quarter of gains in an encouraging sign of
vigorous business investment.
The data suggests Japan's first quarter growth is likely to
be little changed from the initial estimate, which could ease
concerns about the impact of a sales tax increase on the
"Concern about the tax hike seems unwarranted because
non-manufacturers are investing to boost capacity," said Yasuo
Yamamoto, senior economist at Mizuho Research Institute.
"The government's growth strategy still needs to encourage
manufacturers to build new plants domestically. There is a risk
that the growth strategy will disappoint, so monetary policy may
have to pick up the slack."
Preliminary data showed Japan's economy grew 1.5 percent in
January-March from the previous quarter, the fastest gain in
more than two years. In annualised terms, the economy expanded
5.9 percent, due to a surprising rise in capital expenditure and
strong consumer spending.
In preliminary GDP data, capital expenditure grew 4.9
percent, more than double the median estimate for 2.1 percent
Revised gross domestic product data is due on June 9. The
finance ministry data released on Monday is used to re-calculate
the capital expenditure component of GDP.
Even if the growth number were little changed, it would be
an encouragement for Prime Minister Shinzo Abe who is keen for
Japan Inc to spend more of its cash pile of over 200 trillion
yen ($2 trillion) and raise wages to help drive a sustainable
Abe is leaning toward a cut in the corporate tax rate, which
is one of the highest among major economies, to spur corporate
activity and lure foreign firms to Japan.
Economists, though, are worried about how quickly the
economy can rebound from an increase in the national sales tax
to 8 percent from 5 percent on April 1.
The Bank of Japan has repeatedly expressed its confidence
that the economy can withstand the impact from the tax rise and
is on track to meet the central bank's 2 percent inflation
target. As a result, some economists are starting to push back
their expectations for additional monetary easing.
Abe's government is expected to announce another installment
of its "three arrows" economic growth strategy some time in the
middle of the year. In addition to the corporate tax cut, the
government may also relax rules on foreign workers and could
even take steps to legalise casino gambling to give the economy
(Editing by Eric Meijer)