EBC Markets Briefing | Japan’s Nikkei stutters on subdued capex

Japan’s Nikkei 225 fell on Wednesday as the economy extended its dismal performance dating back to last summer. Speculation is growing that the BOJ may raise interest rates again in coming months to prop up the yen.

Japanese companies trimmed capital investment in the last quarter, a result that likely indicates revised data due next week will continue to show the economy contracted in the period.

Manufacturers led the decline though service-sector firms boosted spending a tad. It came on the heels of a surge in spending at the end of 2023, the finance ministry reported.

Corporate earnings showed continued strength, jumping 15.1% from a year earlier, almost double the consensus estimate, and marking the fifth quarter of gains. That helped push the local stocks higher.

The cautious stance stands in contrast to the March decision by many large companies to offer workers the biggest wage increases in three decades this fiscal year.

Weak corporate investment bodes ill both for the economy and the central bank as it indicates companies are concerned about anemic consumption and uncertainties in the external demand.

The benchmark stock index was directionless recently. It may need to breach 50 SMA to bolster the bullish case while 38,000 looks like a favourable entry point.

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