Japanese Economy 2nd half Outlook ...

Japanese companies increase spending at slower pace in the 1Q of this year 

Today, the Japanese economy gave us an optimism outlook for the economic recovery in the next period, while Japanese companies had increased their spending at a slower pace in the first three months of the year after the March quake, signaling the industry sector started its rebound phase. 

Japanese capital spending except software index has increased to 4.2% in the first three months of this year, higher than a -0.8% expected, compares with a pervious reading 4.8% in the fourth quarter of 2010. 

Further, the capital spending in Japan rose to 3.3% in 1Q, from 3.8% in the last quarter of 2010, while the market expectations referred to 3.0%. 

Moreover, the Japanese economy has witnessed some improvements after the March quake, where the industrial sector increased less than market expectations in April, adding the Japanese companies began their production process, signaling that the economic recovery will start its upside movement in the second half of 2011. 

According to the BOJ’s governor speech, he announced that the Japanese companies are working to fix the massive results that affected by the March quake, while companies aim to return the normal levels before the end of this year. 

Further he also noted that the companies’ earnings dropped in the first quarter because of a shortfall in raw materials that use in a production cycle, caused to hurt the overseas sales. Japanese manufacturers sector plans to expand its production by 8% during the month of May and 7.7% in June, adding that Japan’s economic recovery will rebound during the 2nd half of the year. 

Japan contracted 0.9% in the 1st quarter, the second consecutive quarter after the devastating earthquake and tsunami which contributed to suspend the production process in many Japanese multi-national companies, and prompted consumers to cut their spending along with the retreats in consumers' confidence. 

On the other hand, the Japanese companies are planning to rise their abroad investment as companies have money and strong yen on their side, so this planning is a good idea to look abroad at the time. 

Furthermore, some Japan’s companies are going to expand its production in U.S. markets such as Yamaha Motor Co., which is widening its US sales of its terrain vehicles amid the weakening the US dollar and higher transport costs that make costs make manufacturing the off-road products in their biggest market more enticing than building in Japan. 

Still, the government in Japan introducing a lot of stimulus to help economic recovery, the Japanese monetary policy makers have decided to keep the rates unchanged steady in a one of government's efforts to support the economy to exit from its hurdle phase.