Manufacturers’ pretax profits nose-dived 94.3 percent in the October-December quarter from a year earlier to ¥397.6 billion, falling at the fastest pace on record, as the global recession battered export-dependent makers, the Finance Ministry said Thursday.
On an all-industry basis except for the financial and insurance sectors, firms’ pretax profits plunged 64.1 percent from a year earlier, posting the largest decline in 34 years, with electric machinery and communications equipment makers, as well as automakers, sinking into the red.
Nonmanufacturers saw their pretax profits tumble 35.0 percent.
The combined profits of all firms dropped for the sixth straight quarter to ¥5.13 trillion, hitting the lowest level since the fourth quarter of 1985, the ministry’s quarterly survey showed.
The rate of decline was the fastest since fourth quarter 1974, when profits plunged 64.5 percent in the largest decline since April-June 1955, the oldest comparable data, the ministry said.
The latest data “confirmed that the economy has rapidly worsened and faces severe conditions amid the global economic recession,” a ministry official said.
Among manufacturers, communications equipment makers, as well as vehicle and auto parts makers, recorded the first deficits since comparable data became available in the April-June period of 2004.
Oil and coal companies also incurred deficits as their inventories posted appraisal losses due to sharp falls in such commodity prices, a ministry official said.
The ministry’s latest quarterly survey showed corporate capital spending shrank 17.3 percent from a year earlier, logging the biggest decline since comparable data became available in July-September 2002.
Firms’ business investments dropped for the seventh straight quarter to ¥10.77 trillion, as many companies could not afford fresh investments with their profits squeezed by the global economic downturn, a ministry official said.
Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co., said falls in firms’ pretax profits and capital spending “clearly show that Japanese companies are suffering from receding demand amid the global recession.”
He projected that firms’ business investments will likely continue to post double-digit declines from a year earlier in 2009 due to their inventory adjustments.
In the October-December period, manufacturers spent 11.1 percent less on plant and equipment investments than they did a year before, down for the second consecutive quarter. The decline was led by semiconductor, food and vehicle manufacturers.
Nonmanufacturers spent 21.0 percent less, the largest decrease since third quarter 2002, due to dwindling investments by wholesalers and retailers, as well as the marine transport industry, the official said.
In the last quarter of 2008, companies’ sales sank 11.6 percent from a year earlier to ¥346.08 trillion for the fourth consecutive quarterly slip.
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.