Japan firms spend high on capital investment amid sales tax hike

Published Date : Jul 01, 2014

Japanese companies have managed to increase their capital investments more than what was forecasted by market analysts even as the country witnessed a hike in sales-tax in this fiscal year. 

All the large companies in the country are planning to lift-up the capital spending more by 0.1% that of the earlier year by actively investing in capital ventures. This has resulted in the spending of capital investments of 7.4% through March in this fiscal year, a report from the Bank of Japan has indicated. 

A survey of 22 economists undertaken by Bloomberg News had forecasted that the country’s capital investments would stand at an average 6%. 

The country is counting on big companies to use cash holdings in record levels to boost wages and investment as the country’s population is feeling the crunch of inflation five times faster than the increase in their wages. 

 But even with the current average capital investments observed in this fiscal year counting more than the expected levels, it is well below the peak observed in 2007 and is about the same level as in the late 1980s. 

Nonetheless, this counts as positive news for country’s capital investments.  Japanese companies are enjoying huge profits and are loaded with cash. Plans to employ some of it in the market will surely affect the overall economic state of every segment of the country.