Capital investment by Japanese companies expanded 2.2 percent in the April-June quarter from a year earlier on an all-industry basis for the second consecutive quarter of increase, the Finance Ministry said Thursday.

Manufacturers spent 3.4 percent more on plant and equipment, the first upturn in eight quarters, largely because of brisk investment by information technology firms, according to the ministry’s quarterly survey on corporate activity.

Spending by nonmanufacturers rose 1.6 percent — the third consecutive quarter of increase — making it the first time in eight quarters that investment by both manufacturers and nonmanufacturers has risen.

A ministry official said the figures reaffirm that capital investment is beginning to recover and that corporate sentiment over the economy is improving.

Finance Minister Kiichi Miyazawa said Wednesday the upward trend in corporate capital spending is solid. However, he said he remains concerned about personal spending, which along with capital spending, is a key engine of economic growth.

Combined capital investment totaled 9.04 trillion yen.

The ministry reported that combined pretax profit at corporations went up 40.2 percent for the sixth straight quarterly rise, while combined sales grew 3.1 percent, the second consecutive increase.

Manufacturers’ pretax profits shot up 55.5 percent, while those of nonmanufacturers rose 30.8 percent.

Combined sales totaled 314.24 trillion yen, while combined pretax profits came to 9.1 trillion yen.

The ministry based its survey on replies to questionnaires from 19,358 randomly selected companies with capital of at least 10 million yen. The survey did not cover the financial and insurance industries.

The ministry also released figures for fiscal 1999, which showed combined capital investment by manufacturers and nonmanufacturers fell 8.8 percent to 35.83 trillion yen for the second consecutive year of decline.

Combined sales in fiscal 1999 edged up 0.2 percent to 1.383 quadrillion yen, while combined pretax profits grew 27.2 percent to 26.92 trillion yen.

Confidence growing

Major Japanese companies were more upbeat about the economy in the July-September quarter than in the previous three-month period, the Finance Ministry said in a survey released Thursday.

The survey, conducted in August, showed the business sentiment index stood at 5.9 for large firms capitalized at 1 billion yen or more against a revised 4.6 in the preceding quarter, the ministry said. It was the index’s fourth straight quarter in positive territory.

The business sentiment index represents the percentage difference between companies reporting improved business conditions in the reporting period and those reporting a deterioration.

For the October-December quarter, the index stood at 8.3, indicating more large firms believe the economy will improve in the upcoming quarter, the ministry said.

For medium-size corporations, with capital of between 100 million yen and 1 billion yen, the index came in at minus 7.7, compared with a revised minus 8.1 the prior quarter. The index for the upcoming quarter, however, was 3.

The index for smaller businesses, capitalized at between 10 million yen and 100 million yen, was minus 26.3, against a revised minus 21.7 in the April-June period. The index for the October-December quarter was less pessimistic, at minus 16.3.

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