RTTNews - Japanese companies reduced their spending on plant and equipments in the first three months of 2009 as plunging profits forced corporates to cut investment.

During January to March, capital spending plummeted 25.3% from the previous year, following a 17.3% decline in the fourth quarter of 2008, the Ministry of Finance said in a report on Thursday. However, the annual decline in the first quarter was not as severe as the expected 30% slump.

Excluding software, the decline in capital expenditure was 25.4%, larger than the 18.1% decrease seen in the final three months of 2008.

The government uses capital expenditure data in revising preliminary GDP numbers. According to initial estimates, the economy contracted by a record 4% in the first quarter of 2009 compared to the previous three months. The revised GDP report is due on June 11.

The quarterly survey also showed that the combined pretax profits of companies dropped for the seventh straight quarter. In the first quarter, it plunged 70.1% on a yearly basis versus the 64.6% decline seen in the prior quarter.

Meanwhile, sales dropped at a much faster pace of 20.4% in the first three months of 2009, which was the fifth quarter of decline. During October to December, combined sales were down 11.6%.

Yesterday, a Bank of Japan policy board member Hidetoshi Kamezaki said he sees recovery in the near term due to the effect of stimulus measures and easing pace of production declines. It will take significant time for output and sales to fully recover, Kamezaki said.

According to government data, industrial output grew 5.2% in April due to a hike in production of electronic parts and devices, chemicals and transport equipments. Output is expected to increase 8.8% in May and to increase 2.7% in June.

Earlier, BoJ Governor Masaaki Shirakawa said economic recovery in Japan and the rest of the world would be mild as removing excesses accumulated over the past several years will take considerable time.

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