Firms’ capex to focus on technology next year

“Along with a recovery in business performance, we plan to gradually resume capital investment that had been halted during the Covid-19 outbreak.” A manager

TOKYO: A majority of Japanese firms plan to focus their capital spending on technology next year, with investment plans largely unaffected by a plunge in the yen, a Reuters monthly poll shows.

While overall pessimism about the economic outlook remains, the survey backs up reports by the Japanese government and central bank last month that the capital expenditure outlook is turning up.

Among 400 companies polled, 52% said digitalisation and information technology would be a focus for capital investment in fiscal 2023, a trend particularly strong among non-manufacturers.

Digitalisation was the most common answer among all firms, followed by labour-saving measures and decarbonisation.

It marked an increase from January 2019 when 42% of companies said tech would be an investment focus.

Even with the economic headwinds of inflation and the weakening yen, 61% of firms said they were carrying out investment as planned in fiscal 2022.

A total of 90% expected their spending would either stay the same or grow next year.

The yen plunged to a 32-year low against the dollar last month, making imported inputs more costly.

Even so, more than 90% of respondents said the weakening of Japan’s currency had not affected their capital spending.

“Along with a recovery in business performance, we plan to gradually resume capital investment that had been halted during the Covid-19 outbreak,” wrote a manager in the wholesaling industry, who responded under the condition of anonymity.

“To reduce electricity expenses, we are considering investment in in-house power generation, which would go hand-in-hand with decarbonisation,” said another manager in the transportation sector. On overall business sentiment, companies remained dour over the near term.

Among all firms, 78% said conditions would be “not so good” to “bad” by the end of three months, compared with 79% in last month’s survey.

“Orders are recovering, but large projects with long delivery times are not expected to contribute to sales until the second half of the fiscal year,” wrote a manager in the machinery sector.

The Reuters Corporate Survey, conducted for Reuters by Nikkei Research between Oct 25 and Nov 4, surveyed 495 big, non-financial Japanese firms on the condition of anonymity, allowing them to speak more freely.