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Capital spending of big Japan firms to expand 15% in FY 2005: survey.

TOKYO, Dec. 13 Kyodo

Combined capital spending of major Japanese companies for all industries is expected to increase 15 percent in fiscal 2005 from the previous year to about 22.37 trillion yen, an upward revision of 3.4 percentage points from the previous survey conducted in June, the Development Bank of Japan said Tuesday.

Manufacturers plan to expand their capital spending by 22.7 percent in the current fiscal year through next March, while non-manufacturers predict a 10.6 percent increase, the first double-digit rise in 14 years.

If the 15 percent growth rate is realized for all industries, it will be the biggest since fiscal 1988 -- in the middle of Japan's bubble economy, the government-backed bank said.

Automakers and steelmakers are the major contributors to the 15 percent growth, and their capital spending is expected to increase 30.3 percent and 34.8 percent, respectively.

Manufacturers, supported by strong overseas sales and ample cash on hand, are making strong investments in developing new products, the bank said, based on a survey conducted in November.

In the non-manufacturing sector, electric power companies, telecom firms and home appliance retailers plan to actively increase capital spending.

The ratio of capital spending to cash flow is estimated to increase for the first time in five years.

As for fiscal 2006, planned capital spending for all industries is to fall 0.3 percent from fiscal 2005, but it is still an upward revision of 0.7 point from the previous survey.

The bank said 3,592 companies capitalized at 1 billion yen or more, excluding financial and insurance companies, were subject to the latest survey, of which 2,754 or 76.7 percent responded.
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Publication:Japan Weekly Monitor
Date:Dec 19, 2005
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