You are here: Home » International » News » Economy
Business Standard

Pandemic prods Japanese firms to plan biggest capex cuts in decade

The dismal reading highlights the challenge facing Japan's next prime minister, to be chosen in a ruling party leadership race next week

Japan | Global economy

Reuters  |  TOKYO 

Photo: Reuters
Photo: Reuters

By Leika Kihara

TOKYO (Reuters) - Japanese companies plan to make the deepest cut in capital expenditure in more than a decade this year as the coronavirus pandemic hits profits, a government survey showed, underscoring the broadening economic impact of the health crisis.

The dismal reading highlights the challenge facing Japan's next prime minister, to be chosen in a ruling party leadership race next week, as policymakers try to balance the need to contain the virus and support an grappling with its worst postwar recession.

"Companies have little choice but to slash spending when their profit outlook is so gloomy," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"could see more companies cut spending and jobs toward the year-end, which means it will take quite a long time for the to return to pre-pandemic levels," he said.

Companies plan to cut capital expenditure by 6.8% in the fiscal year ending in March 2021, the quarterly survey showed on Friday, more than a 4.4% drop projected three months ago.

It was the biggest proposed cut since January-March 2010, when Japanese exports were crunched by the global financial crisis.

Manufacturers expect to reduce capital expenditure by 4.5% compared with a year earlier, while non-manufacturers plan a 8.1% reduction, the survey showed, suggesting that slumping profits were denting spending appetite across industries.

Companies expect sales to fall 6.8% in the current fiscal year, more than a 5.2% drop projected three months ago and the biggest decline since 2010.

They expect recurring profits to plunge 23.2%, the fastest pace of decline since 2009, with automakers and service-sector firms among those hit hardest by the crisis.

suffered its worst postwar economic contraction in the second quarter as COVID-19 hit businesses. Analysts expect only a modest rebound in the current quarter.


(Reporting by Leika Kihara; additional reporting by Tetsushi Kajimoto; Editing by Jacqueline Wong & Shri Navaratnam)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, September 11 2020. 09:04 IST