Capital spending by Japanese companies expanded 2.5 percent in the January-March quarter from a year earlier to 13.3 trillion yen, marking the fifth increase in a row, the Finance Ministry said Thursday in its quarterly survey.

The brisk investment in plants and equipment was led by manufacturers of information technology-related products, the ministry said.

Due to the current deflation, however, growth of corporate sales and profits slipped in the latest quarter, with sales posting a 2.8 percent year-on-year rise — compared with the previous quarter’s 4.2 percent — and pretax profits unchanged from a year before.

In addition, the ministry said that its separate business sentiment survey conducted in May showed firms of all sizes and categories are growing pessimistic about the state of the economy for the April-June quarter.

Despite the 2.5 percent growth in capital spending for the January-March quarter, the fifth expansionary quarter since the January-March 2000 term, the outlook is bleak because of the current global economic slowdown, a ministry official said.

“Although capital spending was led by manufacturers in IT-related sectors, uncertainties about the global economic trend seem to have weakened business confidence,” the official said.

The capital spending figures will be used to help calculate the gross domestic product for the same quarter, to be released Monday.

In the latest survey, 23,099 randomly selected firms capitalized at 10 million yen and over, except for the financial sector, were queried.

Combined January-March sales of manufacturers and nonmanufacturers came to 358.13 trillion yen, up 2.8 percent from a year before. But sales growth slowed from the preceding quarter, which marked a 4.2 percent rise.

Sales by manufacturers posted only a 0.7 percent rise, which stemmed from an export decrease of steel and electric machinery makers — an apparent downside effect caused by shrinking global demand, the official said.

The survey showed that combined pretax profits industrywide came to 10.99 trillion yen, almost unchanged from a year earlier. Firms’ sales did not expand briskly, with a rise in costs offsetting sales growth, the official said.

Firms that saw profits shrink from the previous year include steel and electric machinery makers and construction, real estate and electric power companies.

The ministry’s business sentiment poll underscored firms’ growing pessimism over ongoing conditions.

The business sentiment index for large firms capitalized at 1 billion yen and over came to minus 12.1, the first subzero figure since the minus 3.9 logged in the July-September term in 1999.

The index, which covers all business sectors other than finance and insurance, represents the difference between the percentage of firms reporting improved business conditions and those reporting a deterioration.

The index for midsize firms registered minus 19.1 and small forms logged minus 30.4, both worsening from the previous survey conducted in February.

Midsize companies are those capitalized at between 100 million yen and 1 billion yen, and small firms between 10 million yen and 100 million yen.

Companies of all sizes, however, said they hold somewhat better prospects for following quarters.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.