Business

Japan sees first fall in corporate profits in over two years due to weak China demand and high material costs

Kyodo

Corporate profits in Japan were down for the first time in 2½ years in the fourth quarter of 2018 amid falling demand from China and rising costs, government data showed Friday.

Pretax profits fell 7.0 percent in the October-December period from a year earlier to total ¥19.48 trillion. The first decline since the second quarter of 2016 indicated that growth in the world’s third-largest economy may be gearing down.

Oil refiners, automakers and manufacturers of telecommunications equipment were among the poorest performers as exports to China slowed and labor and raw materials costs climbed, according to the Finance Ministry.

Still, companies continued to step up capital expenditure in order to boost capacity and productivity. Investment by all nonfinancial sectors for purposes such as building factories and adding equipment increased 5.7 percent from a year earlier to ¥12.05 trillion, up for the ninth straight quarter.

Business investment has been a key driver of the economy, which is thought to be experiencing its longest expansionary phase since the end of World War II. It has been especially important as private consumption remains rather weak amid tepid wage gains.

Compared with the previous quarter, capital expenditure, seasonally adjusted and not including spending on software, rose 3.3 percent.

The Cabinet Office is scheduled to release revised gross domestic product data for the fourth quarter of 2018 on March 8, taking into account the latest investment figures.

Preliminary GDP data showed the economy grew an annualized real 1.4 percent in the October-December period, recovering modestly from a 2.6 percent contraction in the preceding quarter when the country was hit by a string of natural disasters.

The Finance Ministry surveyed 31,826 companies capitalized at ¥10 million or more, of which 23,025, or 72.3 percent, responded.

GET THE BEST OF THE JAPAN TIMES
IN FIVE EASY PIECES WITH TAKE 5