Japan's capital expenditure in the fourth quarter increased 6.5% from a year earlier, according to Ministry of Finance figures released on March 3. Total outlays on factories and equipment for October through December reached 15.4 trillion yen ($97.9 billion), the highest on record for that quarter, indicating that investment demand has remained a key support for an otherwise tepid economy.
Measured on a seasonally adjusted basis, capital spending expanded 3.5% compared with the July-September quarter. The latest quarterly rise marks the fourth consecutive quarter of on-year growth, accelerating from a 2.9% on-year gain in the previous quarter.
Preliminary GDP data published last month showed the economy grew at an annualised rate of 0.2% in the final quarter of last year, a result that fell short of forecasts as inflation weighed on household consumption. In addition, a tariff agreement with the U.S. failed to meaningfully lift exports during the quarter.
Economists expect the Ministry of Finance data to feed into revised gross domestic product figures scheduled for March 10. "The data shows that overall capital expenditures have been firm," Meiji Yasuda Research Institute economist Kazutaka Maeda said, adding that the GDP figures are likely to be revised up.
The data release also reported a 0.7% year-on-year increase in corporate sales for the fourth quarter, while recurring profit rose 4.7% in the same period.
Officials in Tokyo have been seeking to encourage private investment by directing public spending toward sectors the government considers important for economic security. Planned policy steps include capital injections, subsidies and tax credits intended to nudge firms toward higher spending on equipment and facilities.
Analysts note that several structural and cyclical factors have supported corporate investment. Companies have been replacing ageing, low-efficiency machinery to address a long-running labour shortage tied to a shrinking population. At the same time, the end of prolonged deflation has encouraged some firms to bring planned investment forward in anticipation of rising capital costs.
Research from Mizuho Research & Technologies estimates that the government measures could raise capital expenditure by roughly 1%, offsetting some of the headwinds posed by rising interest rates. The think tank projects real capital expenditure growth of 2.7% in fiscal 2026, which begins on April 1, followed by 2.5% in fiscal 2027.
Despite those forecasts, Meiji Yasuda's Maeda questioned whether government funding alone will be enough to directly prompt additional private investment. He noted that many firms already possess sufficient profits to allocate toward capital spending should they choose to do so. "By putting in some money, the government hopes to nudge firms toward becoming investment‑oriented, but I’m not entirely convinced," Maeda said. He also warned that rising external risks, including tensions in the Middle East and tariff issues, complicate companies’ willingness to make new investments.
Currency conversion in the data release used the rate of $1 = 157.3500 yen.