This member said that the decline in business fixed investment was likely to continue in the July-September quarter given the fall in sales and corporate profits.
Business fixed investment has increased moderately as corporate profits have improved; for example, on a GDP basis, it increased in the January-March quarter of 2014 for the fourth consecutive quarter, and thus is growing at an accelerated pace.
Business fixed investment has been on an increasing trend, albeit moderately, supported by the restoration of disaster-stricken facilities, and private consumption has firmed up due in part to the effects of measures to stimulate demand for automobiles.
Business fixed investment has been increasing moderately and the results of the September 2011 Tankan(Short-Term Economic Survey of Enterprises in Japan) showed that business fixed investment plans, including those of small firms, were relatively firm.
On the other hand, corporate profits and business sentiment have stayed at favorable levels on the whole, albeit with some weakness observed in part, and business fixed investment has continued on an increasing trend.
For example, while business fixed investment continues to recover owing toprogress in capital stock adjustment, it has not yet gained the full momentum seen in pasteconomic recoveries.
For example, in the case of facility investment, the funds flow to the contractor for the facility manufacture and/or installation. After facility operation starts, the funds flow in the direction of reimbursement.
An uptrend of business fixed investment will be established once exports and production increase clearly again, but for the time being, the increase in business investment is expected to remain very modest.
Domestically, business conditions had continued to improve and non-mining business investment had continued to increase over the preceding year, while household consumption had increased only moderately.
These plant and equipment investments will be made as part of efforts to enhance the profitability of core businesses, which is one of the fundamental policies of the Company's Medium-Term Management Plan for the fiscal years 2017 to 2019.
Although business fixed investment has been increasing, it still remains substantially below the level of cash flow, and firms are reluctant to aggressively increase fixed investment by raising the funds through bank loans or capital markets.
These facility investments will be implemented in stages over about a period of two-and-a-half years, and the expansion of the production capacity of both silicone monomer and silicone end products will proceed in parallel.
Investment in inventories feeds funds back to the manufacturing industry, investment in facilities to the machine industry, investment in construction to the construction industry and investment in the military to the military industry.
In the GDP statistics, real business fixed investment has been registering a quarter-on-quarter increase for four consecutive quarters since the April-June quarter of 2013. Particularly the increase in the January-March quarter of this year was substantial at 7.6 percent Chart 6.
One of these members pointed out that business fixed investment was likely to follow a clear uptrend but would continue to be under downward pressure from structural factors, such as the decline in the expected rate of return, the burden of excessive debts, and the shift of manufacturers' production to overseas locations.
In this respect, business fixed investment by large firms began to recover infiscal 1995 well ahead of small and medium-sized firms. Investment by smaller firms, which had been more susceptible to the structural adjustment pressures, has also finallybegun to show recovery.
With regard to final demand, business fixed investment has been on a downward trend, although the pace of its decline is slowing. Recovery in private consumption continues to be weak through lack of notable improvements in employment and income conditions.
In addition, business fixed investment in manufacturing has been increasing gradually, and if the rate of increase exceeds that of physical disposal and depreciation costs, this will likely further raise capital stock and supply capacity Chart 5.
As for economic activity through fiscal 2018, members shared the view that business fixed investment was likely to continue increasing, supported by accommodative financial conditions, heightened growth expectations, and increases in Olympic Games-related investment, as well as in labor-saving investment to address the labor shortage.
The economy has continued on a recovery trend, albeit at a slower pace, as seen in exports having shown signs of a pick-up and business fixed investment having been on an increasing trend; however, attention needs to be paid to the outlook for the economy.
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