Pandemic hit to Japan's first-quarter business spending worse than first thought

FILE PHOTO: An employee wearing a protective face mask and face guard works on the automobile assembly line as the maker ramps up car production with new security and health measures as a step to resume full operations, during the outbreak of the coronavirus disease (COVID-19), at Kawasaki factory of Mitsubishi Fuso Truck and Bus Corp., owned by Germany-based Daimler AG, in Kawasaki, south of Tokyo, Japan May 18, 2020. REUTERS/Issei Kato/File Photo

TOKYO (Reuters) - Japan’s companies spent less than initially estimated in the first quarter of the year, revised data showed on Monday, suggesting the coronavirus pandemic’s hit to the economy was deeper than first thought.

Capital expenditure rose just 0.1% in January-March from the same period a year earlier, government data showed, much lower than the preliminary reading of 4.3% growth reported last month.

The weaker data, which is used to calculate revised gross domestic figures (GDP) due next Monday, signalled the world’s third-largest economy shrank at a faster pace than initially estimated in the first quarter, said analysts.

“There’s no mistake that there will be a downward revision (of GDP),” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Demand conditions are likely to remain depressed for a longer time. Overall capital spending will likely remain weak as there are moves to stop investments to achieve labour savings,” he said.

The government reported the second preliminary GDP data last month based on a MOF survey which had to be revised as the ministry could not collect sufficient data for the preliminary capex figures due to coronavirus disruptions.

The government will announce further revisions to the first-quarter GDP figures on Aug. 3 reflecting the revised capital spending data. Japan’s economy shrank a revised 2.2% in the first quarter and remains on course for a much deeper slump in April-June.

Manufacturers’ spending shrank by 5.3% in January-March from the same period a year earlier, compared with an initial estimate of a 0.6% increase, while non-manufacturing spending rose 2.9%, down from 6.2% seen originally.

On a seasonally adjusted basis, capital expenditure rose 3.6% quarter-on-quarter, also lower than an originally-estimated 6.7% increase.

Reporting by Daniel Leussink; Writing by Tetsushi Kajimoto; Editing by Chang-Ran Kim and Sam Holmes