Report published September 25, 2026
Japan: The Price of Japan's Capex Boom – BofA Asia Economic Weekly
Bank of America · September 25, 2026
While Japanese corporate nominal capex has surged, real investment growth remains subdued due to a 17% increase in the investment deflator driven by imported cost inflation and severe domestic construction bottlenecks. Concurrently, regional central bank policy diverges with the BoJ hiking to 1.25% and RBA poised to hike to 4.60%, while Bank Indonesia remains on hold at 5.75%.
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Finvaulta summarizes Bank of America's analysis. Attribute opinions, forecasts, time-sensitive values, and chronology to the issuer and report date; do not treat this page as an independent verification or a current market-data source.
Key Takeaways
- 1.Japan's capex boom is mostly nominal: between 1Q22 and 2Q26, nominal business investment rose 26.2% while real investment rose only 7.9%, absorbed by a 17.0% rise in the investment deflator.
- 2.Physical capital formation is severely restricted by yen depreciation amplifying imported machinery costs and domestic labor bottlenecks stretching construction order backlogs to 20 months.
- 3.Investment import leakage has more than doubled since 2000, with JPY100 of private investment now inducing JPY27.4 of import demand, exerting headwind pressure on the yen.
Table of Contents
- This Week in Focus
- Japan: 25bp rate hike by the BoJ, but still accommodative
- Indonesia: Policy rate unchanged at 5.75%; Stepping up support measures
- Australia: Expecting a hawkish 25bp hike
- Japan in Focus
- The price of Japan's capex boom
- Higher prices constrained growth in machinery and construction
- Machinery prices exposed to foreign costs, weaker JPY
- Construction faces a domestic cost & capacity constraint
- Weaker capital deepening, more import leakage
- Data Preview
- Macro Forecasts
Report data
Exhibit 1: Higher prices have widened the cumulative nominal-real investment gap — as of September 24, 2026.
| Metric | Estimate | Context |
|---|---|---|
| Japan Nominal Business Investment Growth | 26.2% | Cumulative growth in Japanese nominal private non-residential capex |
| Japan Real Business Investment Growth | 7.9% | Cumulative growth in Japanese real private non-residential capex |
| Japan Business Investment Deflator | 17.0% | Cumulative price inflation for business investment |
| Private GFCF Import Inducement Coefficient | 27.4% | Share of private gross fixed capital formation spent on import demand, up from 12.7% in 2000 |
| Japan Structural Construction Workers Job Openings-to-Applicants Ratio | 7.94 x | Labor tightness in construction compared to 1.18x across all industries |
Reports in this series
Asia Economic Weekly is shown in chronological order through this edition, published on September 25, 2026.
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