Japan firms see capex rebound in FY21

20 January, 2021 12:00 AM printer

TOKYO: Almost three quarters of Japanese firms expect to keep capital spending steady or raise it in the coming business year from the fiscal year ending in March, a monthly survey showed, despite broader uncertainty over the coronavirus resurgence.

The latest survey will be of some relief to policymakers counting on investment in areas such as digital transformation and green technology to sustain private demand-led recovery in the world’s third-largest economy, report agencies.

Policymakers worry the recent declaration of a state of emergency in Tokyo and 10 other prefectures could dampen business and consumer sentiment as they struggle to balance the need to revive the economy and contain the virus.

“We cannot loosen our grip on capital expenditure in areas such as IT (information technology) to back telecommuting, although we must avoid any unbridled investment,” a wholesale manager wrote in the Dec 24-Jan 13 survey.

“The cost of investment in reviewing supply chains will rise given the US-China trade frictions will prolong,” wrote a manager at an industrial rubber maker.

The Bank of Japan’s closely watched “tankan” business survey showed last month big firms would cut capital expenditure this fiscal year due in part to slumping profits as a resurgent virus raises worries about a patchy economic recovery.

Companies expected recurring profits to fall 35.3 per cent this fiscal year as sales were seen slumping 8.6 per cent, the tankan showed.

Adding to the gloom, only one-third of Japanese firms saw profits recovering fully in the next business year to levels seen in fiscal 2019 just before the coronavirus pandemic tipped the economy into a deep slump, the Corporate Survey found.

The survey, conducted for Reuters by Nikkei Research, canvassed 482 large and midsize non-financial Japanese firms, of which about a half responded on condition of anonymity.

The most common focus for business expenditure in the coming fiscal year will be repairing/refurbishing, followed by digitalisation and capacity enhancement/business expansion, respondents said.

“Business investment was rebounding strongly at the end of last year. We expect non-residential investment to recover further over the coming months,” Tom Learmouth, Japan economist at Capital Economics, wrote in a research note.

“We already expect business investment to return to pre-virus levels in 2022 - much faster than the seven years it took after the global financial crisis.”


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