Corporate capital expenditure in Japan rose an impressive 12.8% in the second quarter. This marked its highest level in about 12 years. Such developments raised hopes of an economic recovery led by increase in business spending.

Further, Japan’s Services Purchasing Managers Index surged to a four-month high in August. Under such circumstances, investing in mutual funds from Japan seems prudent.

Corporate Capital Expenditure Highest Since 2006

Per the latest report by Japan’s Ministry of Finance (MOF) on Aug 27, corporate capital expenditure in the country surged to its highest levels since 2006 in the April-June period. This not only implies that business spending remained robust in the second quarter but also raised hopes of a strong GDP growth in Japan in the second quarter, led by its private sector.

Growth in investment was bolstered by increased spending on production of cars and electronic components among other things. A business-led recovery in the Japanese economy seems imminent at this point. Further, this marked the seventh consecutive quarter of annualized growth in capital expenditure.

Economists believe that GDP would inch higher after the MOF capex data is used to update the GDP figure for the April-June quarter. Further, Nomura estimates that the country would witness 2.3% growth in the second quarter.

Japan’s Service and Business Activity Springs Back to Life

Per the latest report on Sep 2, the Markit/Nikkei Japan Manufacturing Purchasing Managers’ Index surged to a seasonally adjusted level of 52.5 in August on the back of strength in new orders. This also marks the 24th straight month of increase in manufacturing activity in the country and points to robust business activity in Japan.

Meanwhile, service activity hit a four-month high in August. On Sep 3, the Markit/Nikkei Japan Services Purchasing Managers Index surged to 51.5 in August from 51.3 in July. Such gains were achieved on the back of higher sales and new store openings across the country.