— Japan Q1 Capex (Ex-Software) -12.9% Y/Y Vs Q4 -18.5%
— Japan Q1 Capex (Ex-Software) S/A -2.6% Q/Q Vs Q4 Revised +0.3%
— Japan Q1 Manufacturer Capex -31.2% Y/Y Vs Q4 -34.5%
— Japan Q1 Non-Manufacturer Capex +0.4% Y/Y Vs Q4 -5.8%
— Japan Q1 Non-Fncl Firm Current Profit +163.8% Y/Y Vs Q4 +102.2%

TOKYO (MNI) – The combined capital investment by Japanese
non-financial companies fell 11.5% in the first quarter of 2010 from a
year earlier, the 12th straight quarterly decline, but the pace of
decline slowed from the 17.3% drop in the final quarter of 2009, a
government survey showed on Thursday.

In the manufacturing sector, capex fell 31.2% from a year earlier
in the January-March quarter after falling 34.5% in the October-December
quarter and posting the seventh straight y/y drop, the quarterly survey
by the Ministry of Finance showed.

“While sales and current profits are recovering, capital spending
has not regained strength yet,” a ministry official said.

“We don’t see a fully-fledged move toward investment as higher
production of cars and electronics has been mostly supported by
temporary tax breaks and the government’s reward program.”

Among industries, investment in petroleum and coal products rose
23.5% from a year earlier, up for the second straight quarter after
rising 7.6% rise in the fourth quarter of 2009. It was the only industry
among manufacturers that showed an increase.

Meanwhile, capex in metal products fell 33.7% on year in Q1,
although it improved from a 51.8% fall in Q4, and capex in chemicals
dropped 28.4% on year, slightly better than a 30.0% fall in the previous
quarter.

Capex in the non-manufacturing sector rose by 0.4% on the year in
the first quarter of 2010, improving from -5.8% in the fourth quarter of
2009.

It was the first y/y gain in 12 quarters since January-March 2007,
when business investment among non-manufacturers rose 14.1% from a year
earlier. At the time, capex among manufacturers rose 12.7% and spending
by all industries gained 13.6% as the economy was still during its
longest post-war growth period.

In the sector, capex in construction surged 42.5% from a year
earlier for the first quarter, reversing from a 15.0% fall in Q4. This
is because the economy was depressed in the January-March quarter of
2009 in the wake of the global financial crisis and recession.

Capital spending on real estate rose 23.8% on year, reversing from
a 11.8% drop.

Among industries that showed declines, information and
communications was down by 6.1%, posting the first y/y drop in Q1 in
three quarters after a 13.8% rise in Q4.

Business investment excluding spending on software fell 12.9% from
a year before in Q1, with the pace of decline decelerating from -18.5%
in Q4.

On a seasonally-adjusted, quarter-over-quarter basis, capex
excluding spending on software fell 2.6% in January-March after an
upwardly revised 0.3% rise in October-December (previously -0.9%).

The quarterly survey by the Ministry of Finance also showed that
the combined current profits before extraordinary items of non-financial
firms at the parent level surged 163.8% from a year earlier, posting the
second straight y/y rise and improving from the 102.2% rise in the
fourth quarter of 2009.

The increase was led by auto, chemical and communications equipment
makers, which offset losses in services and transportation.

The ministry surveyed 28,809 companies with capital at or above Y10
million and received replies from 21,475.

The survey is the last piece of data used to compute revisions to
gross domestic product for the January-March quarter due out on June 10.

Preliminary data released last month showed that Japan’s economy
expanded a real 1.2% in January-March from the previous quarter (an
annualized 4.9%), a fourth third consecutive q/q rise, due to strong
consumer spending and net exports as well as capital spending.

When the Cabinet Office released its second preliminary estimate
for October-December 2009, in March this year, real GDP was revised down
to a 0.9% q/q rise (annualized +3.8%) from a preliminary +1.1% q/q
(annualized +4.6%) increase.

Q4 GDP was revised up to a 1.0% q/q rise, or an annualized 4.2%,
when the Q1 data were released last month.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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