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Japan's 1st-Qtr Capital Spending Growth Accelerated (Update5)

Japan is not out of the woods, I think this article is too bullish, I believe Japan has the same fate as the rest of the world, especially since they import lots of oil and do a lot of trading with the United States & Europe...

Japan's 1st-Qtr Capital Spending Growth Accelerated

June 6 (Bloomberg) -- Japanese companies increased investment at a faster pace in the first quarter, suggesting the government will raise its estimate for growth in the world's second-largest economy.

Capital spending rose 7.4 percent from a year earlier to a record 13.7 trillion yen ($130 billion), the Ministry of Finance said in a report in Tokyo today. That compares with growth of 3.5 percent in the previous three months.

Manufacturers including Sharp Corp. and Elpida Memory Inc. say they plan to boost spending in anticipation of higher global demand for electronics goods. The government will probably say the economy grew at a 6 percent annual pace in the first quarter, compared with a May 17 estimate of 5.3 percent, according to the median of five economists' forecasts compiled by Bloomberg News.

``Corporate profitability helped foster the strong rebound in capital spending in the first quarter,'' said Ryota Sakagami, an economist at Nomura Holdings Inc.'s Financial and Economic Research Center in Tokyo. ``With companies showing a willingness to make forward-looking investments, capital spending will be one of the main drivers of growth this year.''

Japanese stocks fell after oil prices jumped above $55 a barrel and a U.S. report showed the world's largest economy created jobs at the slowest pace in almost two years. The Nikkei 225 Stock Average fell 0.3 percent to 11,270.62 at the 3 p.m. close of trading in Tokyo.

The Cabinet Office will use today's report to recalculate capital spending and private inventories in its revised estimate of gross domestic product for the first quarter. The revised GDP report is scheduled for release on June 13 at 8:50 a.m. in Tokyo.

Machinery Orders

Capital spending accounted for about a fifth of the first- quarter's pace of expansion, according to the government's preliminary estimate. Today's report accounts for 60 percent of the total capital spending component.

Company sales rose 6 percent in the first quarter from a year earlier, today's report showed, and profits rose 15.8 percent.

Elpida Memory, the world's fifth-largest memory chipmaker, will increase spending to 143.6 billion yen ($1.3 billion) in the business year that started on April 1, 44 percent more than it had initially allocated, President Yukio Sakamoto said on April 25.

Sharp, the world's biggest maker of liquid-crystal display televisions, said on April 26 it will raise capital spending 3.3 percent to 220 billion yen.

Machinery orders, which point to spending in three to six months, unexpectedly rose for a second month in March, signaling that spending will further fuel growth. Orders rose 1.9 percent from February, a government report on May 13 showed.

To contact the reporter on this story:
Lily Nonomiya in Tokyo at [e-mail]