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Japan’s Top Firms Say Economy Will Improve by Yearend

The top reason for expecting growth this year was a recovery  in capital investment.The top reason for expecting growth this year was a recovery  in capital investment.

Nearly 75% of Japan’s biggest companies believe economic conditions will improve toward the end of the year, according to a survey released Saturday that showed optimism growing amid slow but steady growth.

Of the 108 companies surveyed by Kyodo News in the second half of July, including Toyota Motor Corp. and Sony Corp., 76, or 70%, said the economy is likely to have “expanded” or “expanded moderately” by the end of the year, while 26 said they expect it to remain flat. Three firms expected a slowdown.

The upbeat sentiment comes amid continued moderate growth since 2012. The International Monetary Fund projects Japan’s nominal gross domestic product to reach ¥546.24 trillion ($5 trillion), up from ¥494.96 trillion five years ago.

But concerns remain that heightened tensions over North Korea’s nuclear and missile programs could be a drag on stocks and lead to the yen’s appreciation, affecting the real economy.

In real terms, the IMF forecasts 1.3% growth this year, revised upward from its April estimate of 1.2%.

The top reason for expecting growth this year was a recovery in capital investment, which was cited by 49 firms. Recovery in personal consumption was the second most common answer, given by 37 firms.

As for their capital investment plans for business 2017 ending next March, 59 firms said they plan to increase spending, while 31 said they will invest the same amount as last year. Eight firms planned to cut back.

Prime Minister Shinzo Abe, who earlier this month reshuffled his cabinet to halt his fall in the opinion polls, still needs to deal with allegations of cronyism before he can focus on shoring up the economy.

Among Abe’s policies, free trade deals, including the one finalized between Japan and the European Union, were the most popular, supported by 50 responding firms. Forty-eight said the removal or lowering of tariffs would have a beneficial effect on their business.

A major food company said increased competition from cheap imports would be more than offset by reinvigorating the economy. None made a case for protectionism.

On labor shortages, 54 said they have enough workers and 49 said they do not. Answers varied by industry, with carmakers citing more shortages than financial firms.

The top solution suggested was creating workplaces that women can thrive in, backed by 68 firms. This outpaced the reduction of unnecessary work, hiring more elderly and using such new technologies as artificial intelligence.

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