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Business trends

Japan Inc. to invest 1.1% less than planned in fiscal 2018

Canon and Sharp trim capital expenditure as trade war hits exports

Japanese companies are on track to spend 1.1% less on capital investment in fiscal 2018 than they originally planned.   © Reuters

TOKYO -- Canon, Sharp and other Japanese companies are scaling down their investment plans for fiscal 2018 as the U.S.-China trade conflict raises fears about the economic outlook.

Companies are investing 28.82 trillion yen ($254 billion) in equipment and facilities for the 12 months ending March, according to their plans as of the end of October, a Nikkei study found. This is 1.1% less than what they had planned at the beginning of the fiscal year.

Manufacturers now look to spend 1% less than initially planned, while other businesses are making a 1.3% cut. Plans were downgraded in 18 out of 32 total sectors.

The study covered 1,171 listed companies and privately held counterparts with capital of at least 100 million yen.

Canon implemented one of the bigger revisions, slashing initial plans by 20%, or 40 billion yen. The imaging products maker says it will focus instead on debt repayment to strengthen its financial health.

Sharp made a 16.7%, or 20 billion yen, cut. The electronics company will invest as initially planned in its mainstay liquid-crystal display business but is allocating less money to home electronics and electronic devices.

"The U.S.-China trade war is slowing down the global economy, and this will weigh on exports as well," said Takuya Hoshino, an economist at the Dai-ichi Life Research Institute. Downgrades in capital investment plans are "a sign of economic weakening, and may pose a risk of slowdown in the Japanese economy," he pointed out.

Still, the revised estimates represent a 15.7% increase over last fiscal year, marking the biggest jump since fiscal 1990 -- the tail end of Japan's stock and real estate bubble. Corporate profits are strong, and "the worker shortage is encouraging businesses to make investments to boost efficiency," Hoshino said.

Toyota Motor is increasing spending on factories, like replacing equipment, so it can build more new models. The automaker has earmarked 1.38 trillion yen in investments, up 5.9% on the year.

For some, the trade dispute is spurring new investments. Nidec is setting up a new factory in China for electric car motors, for which demand is growing there. At the same time, it will ramp up output of auto and appliance motors in Mexico -- part of the North American trade zone -- to avoid higher tariffs on Chinese-made products in the U.S.

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