Japan Corporate Profit, CapEx Drop

123jump.com Staff
05 Mar, 2009
New York City

Corporate profits in Japan plunge 65% and companies slash capital spending 18% as domestic and export markets shrink. Japan in the latest quarter ending in December suffered worst economic decline in more than five decades. Stocks rallied on the gains in the region on China spending plan.

[R]5:00AM New York, 7:00PM Tokyo – Japan company pre-tax profit plunges 64.6% to 5.1 trillion yen in December quarter and companies lower capital spending by 18% in the period.[/R]

Japanese stocks climbed 2% leveraged by reports by Chinese Premier Wen Jiabao the country will increase spending in order to attain the 8% economic growth target this year.

Metal and crude oil prices rallied on expectations growth in China will rebound.

In Tokyo trading Nikkei 225 index rose 2% or 142.53 to 7,433.49, and the broader Topix Index jumped 1.3% or 9.51 to 741.55.

In the first section of the Tokyo Stock Exchange 12 billion shares worth 714 billion yen were traded and in the second section 69 million shares valued at 799 million changed hands.

Of the Nikkei 225 index stocks, 181 rose, 36 declined, and 8 were unchanged. CSK Holdings led gainers in the index shares with a rise of 20.6% followed by Jtekt gaining 15.1%.

China Targets 8% Growth in 2009

Chinese Premier Wen Jiabao said in his work report to parliament’s 3,000 delegates at the National People’s Congress the country will achieve the targeted 8% economic growth this year.

The report notes that China’s deficit is Rmb570 billion more than a year ago at Rmb750 billion and is projected to increase further.

Spending on science and technology will increase 25% from last year to Rmb146 billion; social security spending will gain 17.6% to Rmb293 billion, while Rmb 130 billion is earmarked to speed up recovery in the Sichuan province hit by the earthquake in August.

Bilateral relations between China and Taiwan are expected to improve and Beijing will provide Rmb130 billion in financing over the next two to three years to Taiwan-based companies operating on the mainland.

China is also considering making health care, unemployment and retirement benefits universal.

Japan’s Spending Falls 18.1% in December Quarter

Japan’s Ministry of Finance reported today that corporate capital spending dropped 18.1% in the three months ended December 31.

Combined pre-tax profits declined 64.6% to 5.1 trillion yen in the December quarter, falling for the fourth consecutive quarter.

Gainers & Losers

CSK Holdings led gainers in the Nikkei 225 index shares with a rise of 20.6% followed by increases in Jtekt of 15.1%, in Mazda Motor Industries of 10.5%, in NTN Corp. of 10.4%, and Clarion Co. Ltd. of 10%.

Shipping lines gained as the Baltic Dry Index, which measures freight charges of raw materials, advanced 2.5% yesterday. Mitsui OSK Lines edged up 7% and Nippon Yusen soared 4.9%.

Mitsui Sumitomo led decliners in the Nikkei 225 index shares with a fall of 4.8% followed by losses in Chuo Mitsui Trust of 4%, in Canon Inc of 3.9%, in Mitsubishi Rayon Co. of 2.8%, and East Japan Railway of 2.3%.