Japan: Recovery of corporate capex has been lagging

- Recovery of corporate capex has been lagging
• One of the major disappointments on the macroeconomic data front in recent weeks has been the sluggish fixed business investment
• Although many companies have upgraded their profit forecasts amid the improved business conditions, they remain cautious about revising up their investment plans
• The June BOJ Tankan survey revealed only a 0.5% increase in planned capex on an all-firms basis for FY2010; weak sentiment amongst non-manufacturers along with cautiousness on the part of the materials sector appears mainly responsible
- Machinery orders: disappointing
• Core machinery orders decreased for the first time in three month by a large 9.1% mom in May. Orders seem to have bottomed out, but the pace of recovery remains very moderate
• The current account surplus decreased for the first time in four month, by 8.1% yoy in May. While the goods and service surplus continued to expand, the income surplus shrunk in the lower global interest rate environment
- Demand for funds remains weak
• The year-on-year growth in M2 in June slowed down for the first time in three months.
• The year-on-year decline in the balance of bank loans by city banks expanded further in June.
CreditSuisse Japan Economics Weekly 20100708

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