Don_Kenobi
/ 83.5.209.* / 2009-12-03 09:51
By Keiko Ujikane
Dec. 3 (Bloomberg) -- Japanese businesses cut spending at a record pace last quarter, indicating they aren’t yet confident that the recovery from the country’s deepest postwar recession will be sustained.
Capital spending excluding software fell 25.7 percent in the three months ended Sept. 30 from a year earlier, the largest drop since the government began the survey in 1955, the Finance Ministry said today in Tokyo. It was the 10th decline.
The report adds to concerns about an economy that’s already under threat from deflation and the yen’s gain to a 14- year high against the dollar, which is eroding earnings at exporters such as Toyota Motor Corp. The Bank of Japan this week unveiled a 10 trillion yen ($115 billion) credit program, and the government plans to release a spending package to fight price declines and the surging currency.
“It will probably take time before capital investment returns to a sustainable recovery track,” said Naoki Tsuchiyama, market economist at Mizuho Securities Co. in Tokyo. “Concern over a stronger yen and deflation may affect corporate investment with a time lag.”
The Cabinet Office will use today’s report to revise third-quarter gross domestic product figures on Dec. 9. Tsuchiyama said annualized growth may be revised down to about 2.5 percent from the government’s initial figure of 4.8 percent, which was the fastest pace since the start of 2007.
Falling Profits
The yen traded at 87.86 per dollar at 11:33 a.m. in Tokyo from 87.58 before the report. The currency has weakened since climbing to 84.83 per dollar on Nov. 27, the strongest since 1995. The Nikkei 225 Stock Average rose 2.3 percent as the yen’s drop improved the earnings outlook for exporters including Sony Corp. and Honda Motor Co.
Today’s report showed companies’ sales fell 15.7 percent last quarter after tumbling 17 percent the previous three months, as consumer prices fell at home and the stronger yen eroded the value of revenue from abroad. Profits slid 32.4 percent, easing from a 53 percent drop in the previous quarter.
Transport companies led the decline in capital spending, the ministry said. Toyota Motor, Japan’s biggest automaker, is seeking to cut capital investments by 70 billion yen from its initial plans for the year ending March, the most among major companies, a Nikkei Inc. survey showed on Nov. 30.
Slow Recovery
“It’s difficult to see a recovery in capital investment by the end of this fiscal year,” said Susumu Kato, an economist at Calyon Securities in Tokyo, who predicts third- quarter GDP growth will be revised down to about 3 percent. “Even as global demand recovers, there are growing uncertainties over the economy,” such as the yen’s gain and deflation, he said.