Japanese corporate profits in the January-March quarter recorded the biggest decline since 2009, hit by the novel coronavirus pandemic that has ravaged the global economy, government data showed on Monday.
Pre-tax profits of domestic companies covered by the ministry’s quarterly survey plunged 32.0% to 15.14 trillion yen ($ 140 billion) from a year earlier, the largest drop since a fall 32.4% from July to September 2009 following the global financial crisis. crisis, according to the Ministry of Finance.
Profits fell for the fourth consecutive quarter, the ministry said.
Among manufacturers, the transportation equipment sector, including the auto industry, was the worst performer in terms of declining profits as the pandemic hampered global demand, a ministry official told reporters.
In the non-manufacturing sector, service sectors such as accommodation led the decline as people refrained from non-essential outings amid the spread of the virus.
The official said the significant drop in corporate profits reflected “the severe trend in the whole economy” due to the virus pandemic, adding: “We will continue to closely monitor its influence.”
Business sales in Japan fell 3.5% from a year earlier to 359.56 trillion yen, down for the third quarter in a row, while those of manufacturers rose 2.9%, aided by the increased demand for industrial machinery.
Although the virus outbreak has darkened the outlook for the economy, capital spending by all non-financial sectors for such purposes as building factories as well as adding equipment and software has increased by 4.3% to 16.35 trillion yen, after a decline of 3.5% in the previous period.
Investments by electric utilities in additional safety measures at their nuclear power plants contributed to the increase, the official said. On a quarterly basis, seasonally adjusted capital spending rose 6.7% for the first time in three quarters.
The Cabinet Office is expected to release revised gross domestic product data for the January-March quarter on June 8, taking into account the latest capital expenditure figures.
Preliminary data showed the world’s third-largest economy shrank 3.4% in real annualized terms over the three-month period due to the coronavirus pandemic, a significant contraction for the second consecutive quarter that has plunged the country in a so-called technical recession.
Japan’s GDP is expected to contract 20% annualized from April to June from the previous quarter, but rebound to some extent from July to September.
The ministry polled 31,540 companies capitalized at 10 million yen or more, of which 19,636, or 62.3 percent, responded.
Since the response rate has dropped by more than 10 points from the previous quarter, apparently due to the virus pandemic, the official said the ministry will collect data from companies that were unable to respond to time and will release revised figures at the end of July.
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