Capital investment dropped 3 percent in the January-March period from a year earlier, down for the sixth consecutive quarter, according to a Finance Ministry survey released Thursday.
The fall was steeper than the 1.8 percent decline seen in the October-December quarter, although it was better than the double-digit falls that had continued for a year before that.
Combined sales of companies capitalized at 10 million yen or more, excluding financial institutions, also fell but less than in the previous four quarters, the quarterly survey said.
Their combined pretax profits increased 10 percent, although at a much slower pace than the 22.7 percent rise in the previous quarter, it said.
A ministry official said that the data were not necessarily bad news, and that the government has not changed its view on capital spending.
“The (recent) figures have risen after four consecutive quarters of double-digit falls. We believe it is in line with the view that overall, the figures are on an improving trend,” he said.
The data suggest that companies are improving profitability by reducing costs and cutting excess capacity in the face of slow sales but are still reluctant to make new investments, according to the ministry.
Manufacturers spent 5.5 percent less on plants and equipment than they did a year earlier.
Although that was the seventh straight quarter of decline, it was an improvement from a 10.8 percent fall in the October-December quarter and a 23.1 percent drop in the July-September period.
Nonmanufacturers spent 1.9 percent less, after a rise of 2.4 percent in the October-December period.
On a seasonally adjusted basis, capital investment covering all industries except software houses dropped 2 percent, after a 3.4 percent rise in the October-December quarter.
Combined sales of companies excluding financial institutions fell 1.4 percent from a year earlier to 327.24 trillion yen, an improvement from a 5 percent drop in the October-December quarter and a 6.9 percent fall in the July-September quarter.
Sales at manufacturers increased 3.6 percent to 97.26 trillion yen, expanding for the second consecutive quarter.
Nonmanufacturers’ sales fell 3.3 percent to 229.98 trillion yen, down for the seventh straight quarter.
Combined corporate pretax profits for the reporting quarter rose for the third straight quarter, following a 22.7 percent rise in the October-December quarter and a 20.5 percent increase in the July-September period, on the back of companies’ restructuring and cost-cutting efforts.
Manufacturers’ pretax profits rose for the third quarter in a row. But the 36.6 percent rise was much smaller than the 72.7 percent increase in the October-December period and the 48.8 percent increase in the July-September period.
Pretax profits at nonmanufacturers fell 1.2 percent, down for the second consecutive quarter. Increased profits in the real estate, transport and construction sectors were canceled out by declines, notably in the wholesale and services sectors.
Survey questionnaires were sent to 23,055 companies selected at random, and 78.6 percent of them responded.
Business confidence worsens
The business confidence of major Japanese companies worsened in the April-June period from the previous quarter due to global economic weakness and the SARS epidemic, according to a Finance Ministry survey released Thursday.
The ministry said its business confidence index for companies capitalized at 1 billion yen or more worsened to minus 10.3 in the reporting quarter from minus 7.4 in the January-March quarter, staying in negative territory for the ninth straight quarter.
But the survey showed the index is projected to improve to minus 4.1 in the July-September quarter and to zero in the following quarter.
The index is compiled by subtracting the percentage of firms reporting deteriorated business confidence from those reporting improvement.
The index for major manufacturers worsened to minus 6 in the April-June period from minus 1.9 in the previous quarter.
The index for major nonmanufacturers also worsened, to minus 14.1 from minus 10.7.
A ministry official said that along with slumping overseas economies and the negative impact from severe acute respiratory syndrome, falls in Tokyo stocks to 20-year lows may have contributed to the deterioration.
The index for companies capitalized at between 100 million yen and 1 billion yen worsened to minus 18 in the April-June period from minus 14.0 in the previous quarter.
The index for smaller firms weakened to minus 37 from minus 33.1.
It was the first time in six quarters that the business confidence has worsened in all types of firms.
The survey meanwhile found that the combined sales of the polled firms in fiscal 2003 are projected to rise 0.4 percent from the previous year.
Combined pretax profits are expected to increase 9.8 percent in the year to next March 31.
The survey was conducted in May. Questionnaires were sent to 10,591 companies, and 79.7 percent of them responded.
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