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Japan’s Capital Spending Growth Expected To Slow

Capital spending by large Japanese corporations in fiscal 2008 is expected to rise by 4.1 percent, but this will be a sharp slowdown from the 7.7 percent growth last year.

TOKYO (Kyodo) -- Capital spending by large Japanese corporations in fiscal 2008 is expected to rise by 4.1 percent from a year earlier to a combined 25.33 trillion yen on an all-industry basis, but this will be a sharp slowdown from the 7.7 percent growth of the previous year, according to a survey released Tuesday by the Development Bank of Japan.

The estimate as of June, the lowest since fiscal 2004 when growth was 1.7 percent, indicates that companies are cautious about boosting investment, given that sharply higher oil prices and the U.S. subprime mortgage fiasco are having adverse effects on the global economy, industry observers say.

Capital investment has been a major force in driving Japan's economic growth since February 2002.

The estimated amount for fiscal 2008 through next March represents the fifth consecutive yearly increase.

But an official at the government-affiliated bank said capital spending for fiscal 2008 may be revised downward to flat or even negative growth because major companies' earnings are expected to worsen.

Spending by manufacturers is estimated to climb 6.8 percent to a combined 10.36 trillion yen, a rise for the sixth year in a row, with that by automakers projected to increase sharply, according to the report.

For nonmanufacturers, expenditures are expected to rise 2.4 percent, an increase for the fourth straight year, to 14.97 trillion yen, sustained partly by the active investment by electric utilities and operators of supermarkets and convenience stores.

About 2,400 large companies with capitalization of at least 1 billion yen responded to the survey.

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