• Economy

Japan Firms’ Robust Q3 Investment Eases Recession Risks

TOKYO (Reuters) — Japanese companies increased capital expenditure and reaped solid profits in the third quarter, data showed on Friday, suggesting that robust investment will offset soft consumption and help stave off the risk of recession.

The reading may lead to an upward revision in preliminary gorss domestic product (GDP) data, which showed the world’s third-largest economy shrank for the first time in three quarters in July-September.

Firms raised spending on plant and equipment by 3.4% in July-September from the same period a year earlier, after a 4.5% gain the previous quarter, government data showed.

Their recurring profits rose 20.1% in the third quarter from year-before levels with a 40% jump in non-manufacturers’ profits offsetting a 0.9% slide for that of manufacturers.

The capital expenditure figure will be used to calculate revised third-quarter GDP data due out on Dec. 8.

In the preliminary GDP data, capital expenditure fell 0.6% which, coupled with a flat reading in consumption, led to an annualized 2.1% contraction in the July-September period.

The outlook for corporate profits is key to how soon the Bank of Japan may phase out its massive stimulus, as the bank’s scenario is based on the view that companies will keep earning enough to hike wages and boost spending on plant and equipment.