By Jason Clenfield
Oct. 1 (Bloomberg) -- Japanese companies plan to deepen investment cuts as profits slump, inhibiting the recovery from the nation’s worst postwar recession, the central bank’s Tankan survey showed.
Large businesses aim to cut spending 10.8 percent this year, more than the 9.4 percent planned three months ago, the central bank said in Tokyo today. Confidence at big manufacturers rose for a second quarter after plunging to a record low in March.
Stocks fell, heading for their lowest close in two months, on concern demand will weaken once governments worldwide exhaust more than $2 trillion in stimulus spending. The yen’s 8 percent gain in the past three months is another blow to exporters such as Toshiba Corp. and Toyota Motor Corp., whose cost cutting has squeezed incomes and driven the jobless rate to a record high.
“It’s going to take much longer for capex and consumer spending to rebound,” said Seiji Shiraishi, chief economist at HSBC Securities Japan Ltd. in Tokyo. “In a normal recovery, capital spending and private consumption come back after a time lag. What’s different this time is that the level of economic activity is just so low.”
The Nikkei 225 Stock Average fell 1.4 percent to 9,990.03 at the lunch break in Tokyo. The yen traded at 89.84 per dollar from 89.89 before the report. The yield on Japan’s 10-year bond fell one basis point to 1.285 percent.
Less Pessimistic
The index of sentiment among large makers of cars, electronics and other goods climbed to minus 33 from minus 48 in June and a record low of minus 58 in March, the Bank of Japan said. A negative number means pessimists outnumber optimists.
The improvement matched economists’ predictions and only brought the index on par with the level during the 2001 recession. Confidence among large service companies rose for a second straight quarter to minus 24 from minus 29.
“An improvement in sentiment is nice, but as long as it doesn’t lead to more investment, it’s not useful for saying anything about the economy,” said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo.
The capital spending plans are the worst for a September survey in at least 26 years. Large companies see profits falling 22 percent this fiscal year, the Tankan showed.
“The figures are showing some improvement but there’s no change to my view that the economy is still severe,” said Hirofumi Hirano, chief spokesman of the Democratic Party of Japan-led government that came into power last month pledging to support households.
Yen’s Gain
The yen rose to an eight-month high of 88.24 earlier this week, making exporters’ products more expensive abroad and eroding the value of their repatriated profits. The gains prompted Finance Minister Hirohisa Fujii to backtrack on remarks that indicated he supported a stronger Japanese currency.
The “current level around 90 yen is a bit painful,” Toyota Executive Vice President Yukitoshi Funo said on Sept. 25. “I think the yen should be a little weaker.”
Large manufacturers expect the yen to trade at 94.50 per dollar in the year ending March 31, today’s report showed.
Toyota, which has benefited from government programs to encourage spending on energy-efficient cars, yesterday said it will hire 1,600 temporary workers in Japan to meet increased demand for its Prius hybrid. Even after raising its production targets, Toyota estimates a third of its factory capacity will go unused this year. The company in August reiterated its plan to cut capital spending by 36 percent.
‘Still Worried’
“Companies are still worried whether demand overseas will reliably recover,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “Because of that uncertainty, the recent gains haven’t led to a boost in capital spending.”
The effects of cost cuts are ricocheting through the economy. Reduced investment by electronics makers is taking a toll on companies such as Ishii Hyoki Co., a Hiroshima-based producer of equipment used to make circuit boards. The company, which had forecast earnings of 579 million yen ($6.5 million), said last month it’s now expecting a 393 million yen loss.
Workers’ wages have fallen for 15 months, darkening the outlook for retailers including Seven & I Holdings Co. The Tokyo-based company may close about 30 of its Ito-Yokado Co. stores by February 2013, Nikkei English News said today.
Japan’s retail sales fell 1.8 percent in August from a year earlier, the 12th straight decline, the Trade Ministry said today. Analysts forecast a report tomorrow will show the unemployment rate climbed to a record 5.8 percent in August.
Companies are at least finding it easier to get access to funds. The Bank of Japan may decide as early as this month to let its emergency corporate-debt purchasing programs expire, according to people with direct knowledge of the discussions.
Today’s Tankan surveyed 10,235 companies between Aug. 26 and Sept. 30.
To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net
Posts
No comments:
Post a Comment