Japan Q2 corporate capex up 7.4%, pointing to solid domestic demand

TOKYO (Reuters) -- Japanese corporate spending on plant and equipment rose 7.4% year-on-year in the second quarter, Ministry of Finance data showed on Monday, keeping alive expectations of a domestic-led recovery in economic growth.

The solid capital expenditure data, which will be used to calculate revised gross domestic product figures due on Sept. 9, could support the case for the central bank to raise interest rates further in the coming months.

Preliminary data last month showed Japan's economy expanded by an annualized 3.1% in the second quarter, rebounding from a slump at the start of the year thanks to a strong rise in consumption.

Capital spending accelerated from the previous quarter, when it rose 6.8%. It grew 1.2% on a seasonally adjusted quarterly basis.

Monday's capex data also showed corporate sales rose 3.5% in the second quarter from a year earlier, and recurring profits increased 13.2%.

Capital expenditure is one of the key gauges of domestic demand-led economic growth as policymakers count on business investment to be an engine for the world's No. 4 economy as exports struggle amid uncertainties around the U.S. and Chinese economies.

Business spending remained firm in recent years, driven by corporate appetite for investment to offset chronic labor crunch in the fast-aging population.