This is just a brief note
on the news from the Japanese Ministry of Finance this morning that capital spending excluding software declined 7.3 percent year on year in the three months ended Dec. 31. This was the fastest decline in capital spending to be registered in the last five years, and almost certainly means that the Japanese government will use the data to substantially revise down its extimate of Q4 gross domestic product which is due on March 12. Preliminary fourth-quarter GDP data suggested and an annualized rate of 3.7 percent.
The preliminary GDP report showed capital investment as rising at 2.9 percent from the previous quarter and contributing about half of overall growth. If we look at the chart this downward revision really is significant, and it does seem that after Q1 2007 Japanese investment spending fell off something of a cliff. As Claus said to me in a mail this morning this now makes 0.25% interest rates - and rather sooner than later - a virtual certainty.
