Japan's Capex Surge Tests BOJ's Interest Rate Patience

Japan's largest companies have increased their spending on factories and equipment in April-June, which is being closely watched by traders as to whether it will prompt the Bank of Japan (BOJ) to raise interest rates at its September 17-18 meeting.

The Ministry of Finance reported that capital expenditure rose 1.6% from a year earlier in the second quarter, a significant improvement from the prior quarter's near-flat 0.05% gain.

This growth is crucial because it suggests that Japan's economy has gained momentum and is no longer losing steam due to households and firms pulling back.

The companies' ability to invest in their businesses is also fueled by strong sales, which rose 5.9%, and a record-breaking 24.6% increase in recurring profit to 44.7 trillion yen.