© Reuters. FILE PHOTO: Pedestrians make their way at a business district in Tokyo, Japan, December 7, 2020. REUTERS/Kim Kyung-Hoon

By Tetsushi Kajimoto

TOKYO (Reuters) – Japanese companies raised spending on plant and equipment in January-March at the fastest rate since 2015, led by a recovery in car output and chip making as well as service-sector investment in real-estate, reflecting moderate economic growth.

Capital spending has been a bright spot for Japan’s economy, the world’s third largest, which emerged from a pandemic-induced slump in the first quarter buoyed by rebounding consumption and surprise gains in business expenditure.

Japanese firms raised capital expenditure by 11.0% in January-March from the same period a year earlier, posting an eighth straight quarter of gains, Ministry of Finance (MOF) data showed on Thursday.

That marked the fastest gain since July-September in 2015.

On a seasonally-adjusted basis, capital expenditure rose 2.3% quarter-on-quarter in January-March.

The MOF data is used to calculate revised gross domestic product figures for the quarter due on June 8 and follows a preliminary estimate the economy grew by an annualised 1.6% in January-March, twice as fast as expected.

By sector, manufacturers raised capital expenditure by 11.3% year-on-year in the first quarter, while service-sector capital spending rose by 10.8% in the same period, according to the data.

In a positive sign of future appetite for more investment and further wage hikes, Japanese firms increased recurring profits by 4.3% year-on-year in January-March to 23.8 trillion yen ($176.23 billion), a first-quarter record.

By sector, manufacturers’ profits declined by 15.7% year-on-year in the first quarter, while service-sector profits grew by 17.2% in the same period.

The MOF data also showed Japanese firms’ sales grew 5.0% in the January-March quarter year-on-year.

($1 = 135.0500 yen)

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