Manufacturers plan to spend 19.8 percent more on plants and equipment over the previous fiscal year for a third consecutive year of double-digit increases, according to a survey by Development Bank of Japan released Wednesday.
There haven't been three consecutive double-digit increases in capital spending since the previous economic boom peaked in the late 1980s.
The amount planned for investment by manufacturers stood at 8.7 trillion yen for the fiscal year ending next March, against 7.3 trillion yen the previous year.
Capital spending for the previous year was mainly aimed at constructing new facilities to stimulate the saturated domestic market with new products. This type of investment is volatile because it is affected by overall economic strength.
In addition, this year companies are aggressively investing in existing facilities in an effort to gain a global competitive edge, said Hayao Watanabe, director general at the DBJ's economics and industrial research department.
"With global competition becoming severer, the country's capital investment started to show a change," Watanabe said.
Manufacturers in all sectors plan to spend more on investment this year, with demand from automakers and electronics pushing up investment in related sectors, including iron, steel and chemicals, he said.
This year's investment is backed by firm demand, but at the same time, the outlook in coming years will be affected by the United States and China, he added.
The nonmanufacturing sector plans to spend 13.6 trillion yen for fiscal 2005, up 6.9 percent from the previous year. This marks the first rise in five years.
As a result, overall investment for the year will total 22.4 trillion yen, up 11.6 percent and the first double-digit growth in 15 years, according to the bank's survey.
The Development Bank of Japan sent survey questionnaires to 3,625 companies and received responses mainly in June from 76.9 percent.