Capital spending by Japanese manufacturers in the October-December quarter plunged 34.5 percent from a year earlier despite a strong pickup in profits, Finance Ministry data showed Thursday.
Their spending, which amounted to ¥2.83 trillion, has been slumping for six consecutive quarters, and the drop is the second-largest since comparable data became available in the July-September quarter of 2002.
The decline, however, was smaller than the record 40.7 percent drop logged in the previous quarter, the corporate survey said. The survey is a key data source used to revise the gross domestic product, which is due for release March 11.
On an all-industry basis, business investment fell 17.3 percent from the previous year to ¥8.90 trillion in the last quarter of 2009, marking the 11th consecutive quarterly decline. That compares with a fall of 24.8 percent the previous quarter.
The survey said nonmanufacturers spent 5.8 percent less on plant and equipment investment than the year before.
Despite continued weakness in capital spending, the combined pretax profits of all industries, excluding the financial and insurance sectors, turned positive for the first time in 10 quarters, up 102.2 percent from a year before to ¥10.38 trillion.
The manufacturing industry’s total profits rose a record 864.7 percent on a surge in sales of cars and high-tech products, ministry officials said.
But the big recovery in profits is largely being propelled by government stimulus measures both at home and abroad, as well as moves by many manufacturers to reduce salaries and other expenditures, the officials said.
The surge in profits is also looming large because of an advantageous year-on-year comparison with the previous year, when many manufacturers’ profits fell dramatically amid the global financial crisis that erupted in the fall of 2008. Thus current profit levels are still far lower than their precrisis levels.
Many economists said export-oriented manufacturers remain apprehensive about increasing investment because they know that growing demand has been backed by economy-boosting measures.
“They are concerned that the positive effects from the stimulus could fade away at any time,” said Naoki Tsuchiyama, an economist at Mizuho Securities Co.
Automobile and transportation equipment makers slashed capital spending 51.6 percent year on year — surpassing the 34.5 percent contraction for the entire manufacturing industry.
Tsuchiyama said there could be a much larger year-on-year fall in January-March. “On top of overseas economic uncertainties, the massive global recalls by Toyota Motor Corp. will probably impact the trend of manufacturers’ investment in the first quarter,” he said.
Last month, the government said the economy grew at an annualized real rate of 4.6 percent in the October-December quarter for the third straight quarter of expansion as corporate and personal spending improved and overseas demand shot up.
The preliminary GDP report for the fourth quarter said corporate capital expenditures rose 1.0 percent, logging the first expansion in seven quarters. Some economists said they expect the preliminary GDP figures in Thursday’s report to be revised downward.
The ministry sent poll questionnaires to 29,288 companies capitalized at ¥10 million or more, drawing responses from 75.0 percent.
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