Capital spending by major Japanese companies is expected to reach an all-time high in the current fiscal year, with significant investments in data centers, chip manufacturing, power grids, and other areas tied to artificial intelligence. Companies like NTT and Toyota are leading this surge, along with Nippon Steel and Honda, who are retooling production processes.
This positive outlook comes despite a recent dip in capital expenditure. In the first quarter of 2026 (January-March), capital spending excluding software fell by 3.5% from the previous quarter. This reduction was attributed to uncertainty arising from escalating turbulence in the Middle East, particularly the Iran War, which clouded prospects for future growth, even as manufacturers reported record ordinary profits. Including software, capital spending was flat year-on-year, significantly missing economist estimates of 4% growth.
Conversely, in the final quarter of 2025 (October-December), Japan's biggest companies increased capital spending by 4% from the previous quarter. This boost reflected firmer corporate sentiment, partly influenced by Prime Minister Sanae Takaichi's initiative to encourage more investment in strategic sectors. Non-manufacturers specifically increased their investment by 6.5%, while manufacturers slightly trimmed their spending during that period.
