Japanese Investment Uptick?

Japan is showing signs of some stabilization, and the second half of 2003 looks promising, according to recent economic reports. Japanese trade is not going gangbusters, but neither is it imploding. During May, export growth decelerated to 4% year-to-year from 5% in the previous month. Export growth to Asian partners fell to 7% from 10%. The U.S. market is the real weak link here, as bilateral exports are down by approximately 5% over the year.

Also, Japanese businesses continue to ramp up spending on equipment and software. With shipments showing strong growth in two consecutive months, and the inventory to sales ratio near historic lows, businesses will meet additional demand with production, rather than from a stock of inventory. Improved output and profitability will then drive capital expenditures, which are already on the rebound.

Several Japanese business investment projects have moved forward in the US in the past 6 months. More may be headed our way, if things continue to improve.