AAP Finance

Japan capex plans delayed amid trade risks

By AAP Newswire

Most Japanese companies have put capital investment plans on hold as a result of the US-China trade war and other global risks, a Reuters survey has found, in a potential blow for Prime Minister Shinzo Abe's economic agenda.

Delaying improvements in factories, equipment and technology could be a precursor to cutting investments altogether at a time when profits appear to be levelling off and the outlook for consumption - the bulk of economic activity - is dimming.

One firm in five has already cut its initial spending plans at home and overseas for the business year to March, the Reuters Corporate Survey found, while two-thirds say they are sticking to their plans.

Business investment accounts for almost one-fifth of activity in the world's third-biggest economy and has been one of its few bright spots.

Driving spending are companies' moves to refurbish old equipment and pour money into automation, high-tech and labour-saving technology to cope with a shortage of workers in a fast-ageing society.

The findings pose a challenge to Abe's key economic reforms, known as "Abenomics", which has sought to generate sustainable growth through private-sector demand and investment.

The monthly Reuters survey results come as the escalating US-China trade war and global slowdown hurt factory output and exports.

Manufacturers' confidence hit a six-and-half year low in September, the Reuters Tankan survey showed on Thursday.

"As the Sino-US relationship deteriorates, we need to wait and see how production shifts away from China to Vietnam and Thailand," a manager at a metal-products and general-machinery maker that is putting some projects on hold wrote in the survey.

About 56 per cent of Japanese firms are shelving or postponing some investment projects slated for this business year, according to the corporate survey, which canvassed 504 big and midsize firms between August 29-September 9.

Managers from about 250 firms responded to the survey, conducted for Reuters by Nikkei Research, on condition of anonymity to voice their opinions more freely.