Japan's Ministry of Finance said today that capital spending excluding software rose 2.9% in the second quarter from the previous quarter, while investment including software increased 1.6% year-on-year, contrary to economists' expectations of a contraction. Corporate sales rose 5.9% year-on-year, and current profits surged 24.6%, far exceeding market forecasts. These figures reflect that Japanese companies are coping well with the impact of the Middle East conflict and could lead to an upward revision of Japan's second-quarter GDP, with the full data due to be released on September 8. The increased investment also aligns with the Bank of Japan's tankan survey, in which large companies expect investment to rise 11.5% in the fiscal year ending next March, up from the previous forecast of 3.3%. The data may support the BOJ's approach to raising interest rates in the near term, with markets seeing a possible rate hike as early as the September 18 meeting.
Strong investment and profit data boost BOJ rate hike expectations, pushing yields up.
