Japan Firms Cut Capex Spending

Japanese companies plan to slash capital-investment spending by 16% in 2009, the steepest drop in the history of a survey by Nikkei Inc.

According to a story in Monday's online edition of the Nikkei business daily, companies expect to spend 22.7 trillion yen ($230 billion) on capital investments in fiscal year 2009, a 4.28 trillion yen decrease from a year ago, according to the survey of 1,475 firms.

Previously the steepest cut in spending was a 12% decline in 1993. This year's decline marks the second year in a row that capital-investment spending dropped, according to the report. The last time spending fell two consecutive years was 2001 and 2002, when the tech bubble burst.

The Nikkei reported that with 15 of 17 manufacturing sectors planning capital-investment cuts, spending by manufacturers overall is expected to drop a record 24% to a total of 11.7 trillion yen.

According to the survey, electronics firms will spend 3 trillion yen, a 29% drop from a year ago, and automakers said they'd spend 2.3 trillion yen, a 33% decrease. Among manufacturers, only the food and pharmaceutical industries intend to increase spending, according to the Nikkei report.

Non-manufacturers' investment outlays will total about 11 trillion yen, a 4.5% drop, with telecommunications firms spending an estimated 2.6 trillion yen, an almost 6% decrease, and retailers spending an estimated 971 billion yen, a 10% decline, and real-estate firms slashing investments by 42% to about 445 billion yen.

Meanwhile, electric utilities are increasing their spending by about 6%, to 2.6 trillion yen as they invest in solar-power facilities and power-grid upgrades, according to the report. Railway and bus operators intend to spend about 1.8 trillion yen, a 6% increase.

The Nikkei reported that in fiscal year 2010, companies expect to increase investment in capital projects by about 2%, according to 646 respondents, but that does not include many leading electronics and auto makers.

Late last week, the Japanese government reported companies' capital investment plunged during the first three months of this year, as exports and production withered.

Capital spending fell 25.3% in the January-March period from the year-earlier quarter, Ministry of Finance data showed. Recurring profits dropped 69%