Japan firms raise capital spending at fastest pace

Tokyo, November 28:

Japanese firms are raising spending on plants and equipment at the fastest pace for 15 years, helping to drive an economic recovery, according to a survey published today. Private-sector capital investment is set to total $205 billion in the fiscal year to March 2006, up from 15.2 per cent from a year earlier, a poll of 1,762 companies by the Nihon Keizai Shimbun showed. The annual growth rate is the strongest for 15 years, eclipsing the 10.1 per cent rise achieved in the previous fiscal year, the business daily reported.

“Capital spending can be an economic driving force at least by the end of the current fiscal year,” it added. Non-manufacturing companies embarked on aggressive capital spending plans. They marked an estimated 10.3 per cent rise in fiscal 2005 compared with the 1.4 per cent rise in the previous year, helped by robust spending plans by telecom carriers and power companies, the daily reported. Spending by manufacturers remains firm, with annual growth estimated at 18.6 per cent against the 17.2 per cent expansion last year, it reported. Leading the way in the manufacturing sector are automakers, which will boost capital spending by 28 per cent, the poll showed.

Steelmakers are set to hike capital investment by 29.7 per cent in a turnaround from a drop of 6.9 per cent seen in fiscal 2004. Hit by falling electronics prices, growth in spending by electrical machinery companies would slow to 8.9 per cent from 25.1 per cent, it said.