Firms log 15.5 trillion yen profits

Combined pretax profits by companies totaled a record 15.51 trillion yen in the January-March quarter, up 4.1 percent from the same period last year, according to a Finance Ministry survey released Monday.

Capital spending by the companies rose 13.9 percent on an all-industry basis from a year earlier to 15.61 trillion yen.

Pretax profits marked their 15th straight year-on-year quarterly increase and capital spending grew for the 12th straight quarter, underscoring the sustained economic recovery, which has been led by private demand.

According to the survey, manufacturers spent 19.6 percent more on plants and equipment than a year earlier, up for the 12th straight quarter, and nonmanufacturers spent 11.2 percent more, up for the 10th straight quarter.

Capital spending by general machinery makers jumped 32.8 percent, while spending in the information and technology sector was 29.5 percent higher.

Capital investment by companies capitalized at 1 billion yen or more climbed 13.0 percent in January to March, slowing from a 14.3 percent increase in the preceding quarter.

Spending by companies capitalized between 100 million yen and 1 billion yen rose 19.4 percent, up from the previous quarter’s 7.0 percent increase.

Investment by companies capitalized between 10 million yen and 100 million yen rose 13.1 percent, up from zero.

Economists believe the most recent capital spending figures, which are up from the 9.5 percent rise in the October-December quarter of last year, will raise the revised gross domestic product number for the January-March quarter, due out June 12.

“With the firm capital spending data, the GDP figure is almost certainly to see an upward revision,” said Hitoshi Asaoka, an economist at Mitsubishi Research Institute. “It was encouraging that major, midsize and small companies all posted double-digit expansions.”

Asaoka said the business investment data reinforce expectations that the Bank of Japan will raise interest rates in the coming months.

Along with private consumption, capital spending was a major driving force behind growth in the January-March quarter.

The world’s second-largest economy grew a real 0.5 percent, or an annualized 1.9 percent, in January-March for the fifth straight quarterly expansion, the Cabinet Office said in a preliminary report released May 19.

Manufacturers’ pretax profits rose 5.5 percent in the reporting quarter, up for the 15th straight quarter, and those of nonmanufacturers climbed 3.2 percent, up for the 12th consecutive quarter.

Pretax profits at companies capitalized at 1 billion yen or more expanded 19.0 percent, up from the previous quarter’s 17.9 percent rise.

But the profits of companies capitalized between 100 million yen and 1 billion yen fell 6.7 percent, year-on-year, compared with a 14.8 percent increase in the preceding quarter.

Pretax profits at companies capitalized between 10 million yen and 100 million yen slipped 7.5 percent, a deterioration from the previous quarter’s 1.3 percent profit decline.

By sector, pretax profits in the electrical machinery sector climbed 42.5 percent, while those of automakers surged 67.5 percent. Profits in the transport sector dropped 38.7 percent and those by the chemical industry fell 17.0 percent.

Combined sales on an all-industry basis rose 5.0 percent, down from the previous quarter’s 5.5 percent increase, but rising for the 12th straight quarter.

Sales of manufacturers were up 6.4 percent, the 14th straight quarterly increase, and those of nonmanufacturers increased 4.4 percent, up for the 12th straight quarter.

The Finance Ministry survey covered 24,444 companies selected at random from among those capitalized at 10 million yen or more, of which 78.8 percent responded. The survey did not include companies in the financial and insurance sectors.