Japan's Capital Spending Accelerates Amid Global AI Growth

Japanese companies have increased their capital spending pace in the second quarter of this year, indicating a rise in business confidence. According to Ministry of Finance data, capital spending rose by 1.6% compared to the same period last year, accelerating from a meager 0.05% increase in the previous quarter.

The acceleration is attributed to strong global growth in AI, which is creating pressure on Japanese companies to boost investment and avoid falling behind their competitors. Takeshi Minami, chief economist at Norinchukin Research Institute, noted that 'strong global growth in AI is creating pressure on Japanese companies to boost investment so they do not fall behind competitors.'

The figures will be used to calculate revised gross domestic product (GDP) figures due on September 8. Preliminary data last month showed the economy expanding by an annualized 1.1% over the three months, down from 1.9% in the prior quarter as household and business spending softened.

Corporate sales rose 5.9% year-on-year, while recurring profit surged 24.6% to a record 44.7 trillion yen ($279.86 billion). A weaker yen and lower U.S. tariffs helped drive gains at export-oriented manufacturers.