Automakers are among those firms increasing investment. (PANA)

Survival Investment
According to statistics compiled by the Asahi Shimbun from the financial statements released at the end of March by 1,717 companies listed on the Tokyo Stock Exchange, 25 leading companies in the electrical-appliance, automotive, chemical, steel, and shipbuilding industries plan to invest a combined ¥4.61 trillion ($38.46 billion at ¥120 to the dollar) in plant and equipment in fiscal 2003 (April 2003-March 2004), an increase of 5.4% over the previous year and the first rise in three years. Looking at the results by industry, the nine major electrical-appliance manufacturers plan to invest ¥1.95 trillion ($16.25 billion), an increase of 14.6%; the four steel producers ¥291 billion ($2.43 billion), up 26.4%; and the five automakers ¥1.88 trillion ($15.67 billion), up 1.0%. It is noteworthy that investment continues to fall in the chemical industry, where firms are continuing to withdraw from money-losing areas, and the shipbuilding industry, where earnings are still down. This indicates that the industries investing most actively are those where restructuring efforts have already made considerable progress.

The biggest locomotive of industry investment as a whole is the electrical-appliance sector, and the nine major companies in this industry raised investment for the first time in three years after giving themselves some money to work with by cutting costs. Sony Corp., which has cut investment by more than 20% in each of the past two years, will boost investment by 18% this year based on the realization that semiconductors and Internet technology are set to take off and that this is an excellent time to take advantage of the opportunities they offer. Sony plans to up its investment in the semiconductors used in video-game consoles, a major source of profits, by 130% to ¥175 billion ($1.46 billion).

Toshiba Corp. has also decided to go on the offensive, bolstering investment by a whopping 44%. More than half of the funds it will use - ¥151 billion ($1.26 billion) - will be invested in electronic parts, such as flash memory and system LSI semiconductors. Sharp Corp. plans to raise its investment to its highest level ever, concentrating 60% of this money - ¥108 billion ($900 million) - on its liquid-crystal display business. In order to win the battle with South Korea's Samsung Electronics for the lead in manufacturing LCD TV sets, Sharp is working to make bigger screens. Sharp plans to use new equipment and methods to make production of big-screen (40-inch-plus) LCD TVs more efficient at its integrated-production plant in Kameyama, Mie Prefecture.

New Opportunities to Invest
The country's five major auto manufacturers will increase investment for the second year in a row. While Toyota Motor Corp. plans to trim its substantial investment budget by 8% to ¥910 billion ($7.58 billion), Nissan Motor Co. is boosting investment by 11%, Mitsubishi Motors Corp. by 37%, and Mazda Motor Corp. by 25%. Nissan, which has engineered a rapid recovery and has wiped away its real interest-bearing debt, is set to greatly bolster its production capabilities in North America, which is home to 40% of the company's sales. Mitsubishi is splitting off its commercial-vehicle operations, reducing its interest-bearing debt, and expanding its domestic sales network in conjunction with an aggressive focus on new vehicles.

The four major steel companies have increased investment for the first time in two years. Sumitomo Metal Industries is investing ¥47 billion ($392 million) to build a new blast furnace at its plant in Kashima, Ibaraki Prefecture. After the new furnace goes on line next fall, the plant will be able to produce more than 1 million tons of crude steel annually. And with the increased production capacity that will result from the intensification of its steel-plate production facilities at the end of fiscal 2004, the firm hopes to greatly improve its competitiveness. Nippon Steel Corp. and JFE Steel Corp. intend to use their investment to upgrade existing facilities.

The business environment in Japan has been tough recently, and investment had fallen over the past few years as companies worked to become leaner. That investment is now increasing is seen as a sign that these firms have turned the corner and are ready to take the initiative again. For example, major Japanese makers of semiconductors have already paid off 70% of their plant and equipment, compared with a reported rate of around 50% for foreign firms. This should provide domestic producers with an edge in profitability. The view is growing within industry that the coming two to three years offer good opportunities to invest.

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