•Japanese Companies Slash Spending 25% as Exports Collapse, Profits Plunge

Discussion in 'Economics' started by ByLoSellHi, Jun 3, 2009.

  1. Japanese Companies Cut Spending 25% as Exports Slump (Update1)
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    By Keiko Ujikane

    June 4 (Bloomberg) --
    Japanese companies cut spending for an eighth straight quarter as a slump in global demand eroded profits, leaving less money for plant and equipment.

    Capital spending excluding software fell 25.4 percent in the three months ended March 31 from a year earlier, compared with an 18.1 percent decline the previous quarter, the Ministry of Finance said today in Tokyo. Profits tumbled 69 percent.

    Manufacturers from Panasonic Corp. to Konica Minolta Holdings Inc. have cut jobs and are closing factories or scaling back spending plans amid an unprecedented decline in exports. Machinery orders, a key indicator of future expenditure, fell in March even as exports and production showed signs of stabilizing.

    “Nobody’s building new factories,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. “Capital formation is unlikely to be a driver of growth in the foreseeable future.”

    The yen traded at 95.99 per dollar at 8:56 a.m. in Tokyo from 95.92 before the report was published.

    Panasonic, the world’s largest maker of plasma televisions, said last month it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February. Konica Minolta, a maker of film used in liquid-crystal displays, said it will eliminate jobs and reduce spending on research to help save 33 billion yen ($345 million) in costs this year.

    The government will use today’s report to revise gross domestic product on June 11. Preliminary figures showed the economy shrank at a record 15.2 percent pace last quarter.

    ‘Worst Time’

    The report “will reconfirm the first quarter was the worst time for Japan’s economy,” said Shunsuke Saito, an economist at Dai-Ichi Life Research Institute. “Exports and production have already started recovering, and looking ahead, profits will probably stop deteriorating.”

    The Nikkei 225 Stock Average has gained more than 30 percent since reaching a 26-year low in March on speculation spending by governments will halt the slide in the world’s second-largest economy. Finance Minister Kaoru Yosano said this week that the economy may have bottomed in the first quarter and output will probably be on an upward trend in coming months.

    Industrial output rose at the fastest pace in 56 years in April, and companies said they planned to boost output in May and June as well, according to a trade ministry report released last week. Exports fell 39.1 percent in April from a year earlier, after dropping 45.5 percent in March.

    Five-Year High

    Even as output and exports are improving, reports showed domestic demand is weakening. The unemployment rate climbed to a five-year high in April, when wages fell for an 11th month. Toyota Motor Corp., Sony Corp. and Panasonic all expect to post losses again in the current business year.

    Sony last month forecast a second straight full-year loss as the global recession forced the company to cut prices of its Cyber-shot cameras and Bravia televisions. Toyota cut its annual dividend for the first time and predicted a second year of losses.

    To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
    Last Updated: June 3, 2009 19:58 EDT

    Japanese Companies Cut Spending 25% as Exports Slump (Update1)
    Share | Email | Print | A A A

    By Keiko Ujikane

    June 4 (Bloomberg) -- Japanese companies cut spending for an eighth straight quarter as a slump in global demand eroded profits, leaving less money for plant and equipment.

    Capital spending excluding software fell 25.4 percent in the three months ended March 31 from a year earlier, compared with an 18.1 percent decline the previous quarter, the Ministry of Finance said today in Tokyo. Profits tumbled 69 percent.

    Manufacturers from Panasonic Corp. to Konica Minolta Holdings Inc. have cut jobs and are closing factories or scaling back spending plans amid an unprecedented decline in exports. Machinery orders, a key indicator of future expenditure, fell in March even as exports and production showed signs of stabilizing.

    “Nobody’s building new factories,” said Jesper Koll, chief executive officer of hedge fund adviser TRJ Tantallon Research Japan. “Capital formation is unlikely to be a driver of growth in the foreseeable future.”

    The yen traded at 95.99 per dollar at 8:56 a.m. in Tokyo from 95.92 before the report was published.

    Panasonic, the world’s largest maker of plasma televisions, said last month it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February. Konica Minolta, a maker of film used in liquid-crystal displays, said it will eliminate jobs and reduce spending on research to help save 33 billion yen ($345 million) in costs this year.

    The government will use today’s report to revise gross domestic product on June 11. Preliminary figures showed the economy shrank at a record 15.2 percent pace last quarter.

    ‘Worst Time’

    The report “will reconfirm the first quarter was the worst time for Japan’s economy,” said Shunsuke Saito, an economist at Dai-Ichi Life Research Institute. “Exports and production have already started recovering, and looking ahead, profits will probably stop deteriorating.”

    The Nikkei 225 Stock Average has gained more than 30 percent since reaching a 26-year low in March on speculation spending by governments will halt the slide in the world’s second-largest economy. Finance Minister Kaoru Yosano said this week that the economy may have bottomed in the first quarter and output will probably be on an upward trend in coming months.

    Industrial output rose at the fastest pace in 56 years in April, and companies said they planned to boost output in May and June as well, according to a trade ministry report released last week. Exports fell 39.1 percent in April from a year earlier, after dropping 45.5 percent in March.

    Five-Year High

    Even as output and exports are improving, reports showed domestic demand is weakening. The unemployment rate climbed to a five-year high in April, when wages fell for an 11th month. Toyota Motor Corp., Sony Corp. and Panasonic all expect to post losses again in the current business year.

    Sony last month forecast a second straight full-year loss as the global recession forced the company to cut prices of its Cyber-shot cameras and Bravia televisions. Toyota cut its annual dividend for the first time and predicted a second year of losses.

    To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net
    Last Updated: June 3, 2009 19:58 EDT