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Japan Inc.’s capital spending poised to roar back 25%, Nikkei poll

  • June 21, 2022
  • , Nikkei Asia , 2:49 a.m.
  • English Press

By RYOTARO YAMADA, Nikkei staff writer

 

TOKYO — Japanese companies look to invest 25% more into equipment, real estate and other physical assets this fiscal year, a Nikkei survey shows, as catching up on delayed plans and a growing interest in decarbonization propel them toward the sharpest jump in nearly half a century.

 

Planned capital investment by 876 major companies has increased for the first time in three years, to 28.66 trillion yen ($212 billion) — the second highest tally on record, after 28.98 trillion yen in fiscal 2007. The year-on-year increase marks the steepest growth since fiscal 1973.

 

Manufacturers anticipate a 27.7% increase in capital spending to 17.5 trillion yen, driven by growing demand for electric vehicles and related products as well as the global shortage of semiconductors.

 

Nonmanufacturers like retailers, many of which were squeezed by the coronavirus pandemic, also are proceeding with postponed investments. They project a 20.8% rise to 11.16 trillion yen.

 

Companies intended to boost capital investment by 10.8% in fiscal 2021, the Nikkei survey for that year shows. But they ended up logging a 0.2% decrease as the shortage of chips and other components derailed their plans. Around 10 percentage points of the increase planned for this fiscal year might be attributable to those delayed investments.

 

Nissan Motor made 345 billion yen in capital investments during fiscal 2021, down from its planned 440 billion yen, due to the impact of COVID-19. The automaker looks to invest 440 billion yen this fiscal year into EV production equipment and other areas.

 

“Though we’re facing a difficult environment due to the chip shortage and other factors, we will make investments for our future,” President and CEO Makoto Uchida said.

 

Murata Machinery invested 8.5 billion yen in fiscal 2021, down from a plan of around 14 billion yen. The company looks to more than double spending this year to 18.8 billion yen and increase output of conveyor systems for chip plants.

 

Still, “we don’t know if we can keep up with our plans, since it’s unclear whether we can secure the necessary materials,” President and CEO Daisuke Murata said.

 

Supply-side constraints will determine whether Japan’s companies make these investments this year. A continued shortage of parts and materials could make investment of any kind more difficult if factors such as Russia’s war against Ukraine lead to an economic downturn.

 

By industry, automakers intend a 23.6% increase in capital investment this fiscal year. Suzuki Motor is looking at a 53.1% jump to 290 billion yen, as it plans a new EV and battery plant in India.

 

Electronics makers project a 26.7% increase, buoyed by demand for EV parts. Panasonic Holdings aims for a 45.5% boost to 345 billion yen as it prepares to mass-produce new batteries for Tesla. Sony Group will invest more into image sensors, which are used in smartphone cameras.

 

But uncertainties remain.

 

“Commodities prices are rising while the yen weakens, and around 70% of companies see the soft currency as a disadvantage,” said Saisuke Sakai at Mizuho Research and Technologies. “With the Russian invasion of Ukraine going on as well, there is a big risk that investments could fall short.”

 

Delayed investments due to supply-side constraints could bring further shortages of key components like semiconductors, which in turn would raise the price of final products. Greater global inflation also could discourage companies from making fresh investments.

 

The survey covered publicly traded companies, as well as those with 100 million yen or more in capital.

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