Development Bank of Japan
Research Report
No. 2

Survey on Planned Capital Spending
for Fiscal Years 1998, 1999 and 2000
(Conducted in August 1999)

November 1999

Economic and Industrial Research Department
Development Bank of Japan

Contents

Ⅰ Outline ............................................................................................................................1
Ⅱ Summary........................................................................................................................ 3
1. Overall Condition.........................................................................................................................3
2. Actual Capital Spending for FY 1998........................................................................................3
3. Planned Capital Spending for FY 1999.....................................................................................3
4. Features of Planned Capital Spending for FY 1999 ................................................................4
5. Planned Capital Spending for FY 2000.....................................................................................5
Ⅲ Survey Results................................................................................................................ 8
1. Actual Capital Spending for FY 1998........................................................................................8
2. Planned Capital Spending for FY 1999.................................................................................. 11
3. Planned Capital Spending for FY 2000.................................................................................. 16
4. Investment Motives................................................................................................................... 16
5. Trends in Land Investment (Classified According to Principal Business Sector)............ 19
6. Foreign Direct Investment and Capital Spending Abroad (Classified According to
Principal Business Sector) ........................................................................................................ 21
7. Trends in Capital Spending by Foreign-Affiliated Firms (Classified According to
Principal Business Sector) ........................................................................................................ 22

Development Bank of Japan Research Report/ No. 2iⅠ Outline
Objectives
This survey has been conducted annually since FY 1956 by the Japan Development Bank toassess major trends in the capital spending of Japanese industry.
Target Firms and Survey Methods
This survey covers all private firms in Japan’s major industries capitalized at ¥1 billion or more
(excluding agriculture, forestry, finance and insurance, medicine, etc. Specifically the survey
targets the industries listed in the reference, “Table of Industrial Classifications in The Japan
Development Bank’s Survey on Planned Capital Investment” that is appended at the end of
Volume I). In addition, the Teito Rapid Transit Authority has been included in the survey despite
the fact that it is classified as a (non-financial) public corporation under the new System of
National Accounts (SNA).
The survey was conducted by means of questionnaire (sent to and completed by individual
firms).
Contents of the Survey
The main issues addressed by the survey were as follows: (i) Actual capital spending in FY 1998
and planned capital spending in FY 1999 and FY 2000, (ii) Details of individual construction
projects in each of the above years, (iii) Anticipated revenue and expenditure in FY 1998 and FY
1999, (iv) Investment motives in FY 1998 and FY 1999, (v) Trends in land investment in FY
1998, FY 1999 and FY 2000, (vi) Foreign direct investment and capital spending abroad in FY
1998 and FY 1999.
Capital spending has been calculated on a construction basis. In general, it is calculated as thesum total of tangible fixed assets including the construction in progress account (without
subtracting resale value, depreciation and loss).
The Scope of Capital Spending
In this survey, capital spending refers to domestic investment in the tangible fixed assets of one’s
own corporation; they include buildings, structures and equipment (including ships, aircraft,rolling stock, tools and furnishings), as well as the purchase and development of land (excluding
the purchase of land for subdivision in the real estate industry). Accordingly, intangible fixed
assets are excluded, as are capital spending abroad and investment in subsidiaries/affiliated firms(with the exception of that shown under ‘Foreign direct investment and capital spending
abroad’).
Date of Survey
August 10, 1999
Responses
The responses to the survey are shown below:
Principle BusinessClassification
Investment SpecificClassification

No. of Firms Targeted

No. of Firms Giving
Valid Responses

Proportion of Valid
Responses

3,302

2,923

88.5%

4,005

3,580

89.4%

Development Bank of Japan Research Report/ No. 2 1

Industrial Classification for the Totals
As a rule, the totals for the various industrial sectors have been formed after classifying theamount of investment for each business department in a company’s response according toindustrial sector (Investment Specific Classification). In some parts of the analysis, however,classification and totaling of the companies’ responses have been carried out based on the main
business interest of each company (Principle Business Classification).

2

Development Bank of Japan Research Report/ No. 2

Controls on Capital Spending Continue
Small Decrease in Capital Spending Seen for the Third Consecutive Year

Ⅱ Summary
1. Overall Condition
Overall actual capital spending for all industries in FY 1998 was down 8.0%, the second
consecutive year of decline. (All figures are on a construction basis; the rate of growth or decline
is compared with the previous year.) Looking at planned capital spending for FY 1999, both the
manufacturing sector (down 10.1%) and the non-manufacturing sector (down 0.7%) willcontinue to curtail investment, meaning an overall drop (3.7%) for all industries for the third
straight year.
2. Actual Capital Spending for FY 1998
Looking at actual capital spending for FY 1998, there were downward revisions in most industrial
sectors after the last survey (February 99), with the overall figure down 8.0%, the second
consecutive year of decline.
3. Planned Capital Spending for FY 1999
Planned capital spending for FY 1999 will decline in both the manufacturing sector and the nonmanufacturing sector. The overall planned decrease is 3.7%, the third consecutive year of decline.
In the manufacturing sector (down 10.1%), investment will increase in the food & beverages
industry for new factory construction for beer, alcoholic beverages and other food products, andthe rate of decline in electric machinery investment will slow. But in most industries, the size ofinvestment cuts will increase, mainly because of cutbacks in automobiles for investment into newmodels and continued curbs on investment in organic chemicals. The result will be a double-digit
fall in investment spending for manufacturing as a whole. In the non-manufacturing sector (down
0.7%), increases in spending are planned in electric power thanks to progress being made in atomic
power plant construction projects, in the leasing industry where the capital procurement
environment continues to improve. Transportation will benefit from spending for construction of
new rail lines or expansion of existing lines in the Tokyo metropolitan area and for new airport
construction. Services investment will grow due to theme park construction. On the other hand,telecommunications & information technology spending will fall due to the improved efficiency oftelecommunications investment and reactionary cuts in information services. Taken as a whole,these factors will lead to an overall slight drop in capital spending in the non-manufacturing sector.
A comparison of each half of FY 1999 with the corresponding period in the previous year for
all industries predicts an overall decrease of 2.1% in the first half of FY 1999, and a decline of
5.1% in the second half.
In comparison to the previous survey (February 1999), investment was revised downwards inboth the manufacturing sector (down 5.2%) and the non-manufacturing sector (down 2.7%).

Development Bank of Japan Research Report/ No. 2 3

This means an overall downward revision of 3.4%. The decline in both the manufacturing sector
and the non-manufacturing sector in the August survey marked the second consecutive year, thefirst time this has occurred since the survey method was changed in FY 1971 to the method now
used.
Looking at the respective shares of different investment motives for manufacturing, there is adecrease in “expansion of production capacity” for both the materials industry and theprocessing & assembly industry. This is the result of a remarkable decline in the materials
industry, where there are strong concerns about excess manufacturing capacity in sectors such as
paper & pulp, chemicals and non-ferrous metals, plus a decline in all the processing & assembly
industry with the exception of electric machinery. On the other hand, “rationalization and laborsaving” and “maintenance” increased in many sectors in the materials industry. Also “productdevelopment and upgrading” rose in industries such as general machinery and non-ferrous metals,
and “research & development” also increased as a motive in many industries including electricmachinery, automobiles and chemicals. Despite the decline in spending overall, this would appear
to indicate the companies are maintaining posture that is focusing on the future industrial sectors.
Land investment shows a big drop of 54.6% from the previous year, with double-figure
reductions planned in both the manufacturing and non-manufacturing sectors. As a result, theshare of land investment in total capital spending will drop from 8.6% to 4.1%.
The ratio of capital spending to cash flow (net profit/loss plus depreciation expenses) will fallin both the manufacturing sector and the non-manufacturing sector. This is because a large
number of firms that project improvements in their profit picture are reducing capital spending.
Looking at foreign direct investment (based on figures for the 1,246 firms responding to both
FY 1998 and FY 1999 surveys) and capital spending abroad (based on figures for 1,174
companies in both surveys), in the manufacturing sector (up 8.0%), which accounts for the
majority of foreign direct investment in the survey responses, there is a double-digit decline forthe processing & assembly industry (down 32.9%), in particular for non-ferrous metals and forchemicals. Despite this decline, the total for all manufacturing will rise because of an increase in
the processing & assembly industry, which will receive a boost from a huge jump in large-scale
investment in food & beverages (up 70.2%).
Turning to capital spending abroad (down 11.3%), there is a large decline in the materials
industry (down 47.6%) that account for the largest share of the investment amounts in the
responses to the questionnaire, particularly non-ferrous metals and textiles, plus a decline in theprocessing & assembly industry (down 4.6%) centered on general machinery. As a result, in the
manufacturing sector the ratio of capital spending abroad to domestic capital spending will fall byapproximately two percentage points from 33.3% in FY 1998 to 31.2% in FY 1999.
The domestic capital spending of foreign-affiliated firms (firms with over one-third foreign
ownership; 142 respondents) shows an increase of 9.5% to ¥539.2 billion thanks to large scale
investment in services. Foreign-affiliated firms now account for 2.1% of total capital spending inJapan.
4. Features of Planned Capital Spending for FY 1999
Planned capital spending for FY 1999 was largely revised downward from the previous survey(February 1999), particularly in the manufacturing industry. Firms have further tightened capitalspending controls, which will reduce spending to a level 70% of the past peak year (FY 1991).
Looking at the respective shares of different motives for capital spending, in both the
manufacturing and the non-manufacturing sectors there is a reduction in “expansion of
production capacity” and a decrease in the ratio of capital spending to cash flow that reflects aheightened negative spending posture. It is worth noting, however, that with regard to future
4

Development Bank of Japan Research Report/ No. 2

expansion, business reorganization in selected manufacturing industries is showing itself in theform of future-oriented capital spending.
In manufacturing, an attitude of strict control that has pared planned capital spending to alittle more than 50% of the past peak is striking. In the materials industry in particular,
remarkable declines of “expansion of production capacity” as an investment motive and in theratio of capital spending to cash flow are obvious, providing evidence of just how strong are thefeelings that the industry has excess capacity. Reductions in planned investment are continuing inmost industry sectors of the processing & assembly industry as well. But despite the tight rein on
spending, in some sectors such as food & beverages, transportation and electric machinery,aggressive investment aimed at business reorganizations is also apparent, such as plans toconcentrate on manufacturing in strong areas that should be strengthened.
In non-manufacturing, many industries including the large sectors such as telecommunications& information technology will reduce spending. Despite the increase in scheduled investment
based upon long-term plans, such as in the transportation industry where spending will increase forboth new airport construction and construction/expansion of new high-speed rail lines, and inservices which will be boosted by large-scale theme park construction, in many instances in recent
years the level of spending in sectors that plan to increase spending, such as electric power or
leasing, was revised downward. Spending efficiency is being closely scrutinized and the overall tone
is one of weakness.
5. Planned Capital Spending for FY 2000
Planned capital spending for FY 2000 shows an overall decrease of 5.0%. In both the
manufacturing sector (down 10.9%) and the non-manufacturing sector (down 4.0%), however,there are a large number of decisions that still have not been made. Furthermore, the size of thisdrop is larger than those seen in the recent August surveys.

Development Bank of Japan Research Report/ No. 2 5

Trends in Capital Spending for FY 1998 through FY 2000

Total
(except Electric Power)
Manufacturing
Non-Manufacturing(except Electric Power)(Electric Power)

FY 1998 Survey (Actual)(2,709firms )GrowthFY 1997 FY 1998
rate
(Actual)(Actual)
98/97
284,065
261,288-8.0(239,692) (220,444)(-8.0)
93,364
81,237-13.0
190,701
180,051-5.6(146,327) (139,207)(-4.9)(44,374)(40,844)(-8.0)FY 1999 Survey (Planned)(2,923 firms )GrowthFY 1998 FY 1999
rate
(Actual) (Planned)
99/98
267,436
257,583-3.7(226,332) (213,593)(-5.6)
84,46675,945-10.1
182,970
181,638-0.7(141,867) (137,648)(-3.0)(41,104)(43,990)(7.0)(Units: 100 million yen, %)FY 2000 Survey (Planned)(1,505 firms )GrowthFY 1999 FY 2000
rate
(Planned) (Planned)
2000/99
110,482
104,945-5.0(72,325)(66,229)(-8.4)
15,58813,882-10.9
94,89491,064-4.0(56,737)(52,347)(-7.7)(38,157)(38,716)(1.5)

Comparison with the February 1999 Survey (Revision Rates for Companies in Both
Surveys)
FY 1998 (Actual)-5.0(-3.1)-4.4-5.2(-2.2)(-14.1)

Total(except Electric Power)
Manufacturing
Non-Manufacturing(except Electric Power)(Electric Power){(Units: %)FY 1999 (Planned)-3.4(-1.6)
-5.2
-2.7
(0.5)
(-11.1)}

Note: Revision rate = This survey (Aug. 99)/Previous survey (Feb. 99) - 1 × 100

6Development Bank of Japan Research Report/ No. 2

Capital Spending by Industry for Fiscal Years 1998-2000
Capital Spending (hundred million yen)

Component Rate(%)
FY1998 FY1999
2000/99 (Actual) (Planned)(2,923 firms)

Growth Rate (%)

FY1998FY1999(Actual) (Planned)(2,923 firms)

FY1999FY2000(Planned) (Planned)(1,505 firms)

98/97

99/98

Total
except Electric Power267,436
226,332

257,583
213,593

110,482
72,325

104,945
66,229

-8.0
-8.0

-3.7
-5.6

-5.0
-8.4

100.0
84.6

100.0
82.9

Manufacturing
Food & Beverages
TextilesPaper & Pulp
Chemicals
Organic Chemicals
Pharmaceuticals
Petroleum
Cement, Ceramics & Glass
Iron & Steel
Ordinary Steel
Non-Ferrous Metals
General Machinery
Electric Machinery
Electric Devices, etc.
Precision MachineryTransportation
Automobiles
Other Manufacturing

84,466
5,792
970
2,555
11,618
5,206
2,643
2,124
2,454
5,804
4,696
2,666
6,396
19,235
11,953
1,434
16,88815,7606,530

75,945
5,930
811
1,760
10,243
4,533
2,387
1,671
1,889
5,289
4,455
1,973
5,403
18,882
11,366
1,235
15,306
14,4695,552

15,588
728
125
397
2,711
1,066
906
669
474
2,097
1,925
1,009
833
3,810
2,393
77
1,797
1,610
860

13,882
663
64
471
2,735
965
1,034
599
541
1,379
1,198
958
739
3,306
2,201
83
1,698
1,584
646

-13.0
-12.1
-5.4
-33.8
-10.2
-18.4
0.4
-32.5
-9.5
0.3
5.0
-25.4
-6.9
-21.9
-23.6
-3.3
-2.9
-4.2
-9.1

-10.1
2.4
-16.4
-31.1
-11.8
-12.9
-9.7
-21.3
-23.0
-8.9
-5.1
-26.0
-15.5
-1.8
-4.9
-13.9
-9.4
-8.2
-15.0

-10.9
-8.9
-48.8
18.8
0.9
-9.5
14.0
-10.4
14.1
-34.2
-37.8
-5.1
-11.3
-13.2
-8.0
7.7
-5.5
-1.6
-24.9

31.6
2.2
0.4
1.0
4.3
1.9
1.0
0.8
0.9
2.2
1.8
1.0
2.4
7.2
4.5
0.5
6.3
5.9
2.4

29.5
2.3
0.3
0.7
4.0
1.8
0.9
0.6
0.7
2.1
1.7
0.8
2.1
7.3
4.4
0.5
5.9
5.6
2.2

Non-Manufacturing
182,970
except Electric Power141,867
Construction
3,125
Wholesale & Retail
12,793Retail9,714
Real Estate
11,502
Transportation
18,804
Railways
12,416
Marine Transport
1,042
Airlines
1,915
Warehousing, etc.
1,526Electric Power & City Gas 44,843
Electric Power41,104City Gas
3,740
Telecom.& Information
43,984
Leasing
44,046
Services
3,463
Other Non-Manufacturing409

181,638
137,648
2,073
11,313
8,949
8,054
20,87814,706
622
1,923
2,259
47,60743,9903,617
39,02047,277
4,999
417

94,89456,737
581
5,040
3,454
4,114
10,408
6,183
577
1,780
1,345
41,71038,157
3,553
11,476
19,9601,464
13991,06452,347
514
4,325
3,236
3,541
8,985
5,405
260
1,378
1,450
42,511
38,716
3,795
9,043
20,967
1,031
146

-5.6
-4.9
-16.6
-1.7
-3.9
-19.2
-8.8
1.3
-14.3
-44.0
-19.7
-7.6
-8.0
-3.7
3.7
-6.5
-7.1
-25.5

-0.7
-3.0
-33.7
-11.6
-7.9
-30.0
11.0
18.4
-40.3
0.4
48.0
6.2
7.0
-3.3
-11.3
7.3
44.3
1.9

-4.0
-7.7
-11.5
-14.2
-6.3
-13.9
-13.7
-12.6
-55.0
-22.6
7.9
1.9
1.5
6.8
-21.2
5.0
-29.6
5.0

68.4
53.0
1.2
4.8
3.6
4.3
7.0
4.6
0.4
0.7
0.6
16.8
15.4
1.4
16.4
16.5
1.3
0.2

70.5
53.4
0.8
4.4
3.5
3.1
8.1
5.7
0.2
0.7
0.9
18.5
17.1
1.4
15.1
18.4
1.9
0.2

Note: Other Manufacturing Industries includes Publishing & Printing, Rubber, Metal Products and Others.
Other Non-Manufacturing Industries includes Fishing, Mining and Others.

Development Bank of Japan Research Report/ No. 2 7

Ⅲ Survey Results
1. Actual Capital Spending for FY 1998
OutlineOverall actual capital spending for FY 1998 was down 8.0% from the previous year, the second
consecutive year of decline. The size of the decline increased. In the manufacturing sector (down
13.0%), despite a small increase in spending in the iron & steel industry, spending fell in almost
all industries including decreases in chemicals, paper & pulp, automobiles, non-ferrous metals,
food & beverages and other manufacturing. Following a broadened decline in electric machinery
because of controls on spending into semiconductors, this resulted in the first decrease in total
manufacturing spending in four years. In the non-manufacturing sector (down 5.6%), spendingrose in the telecommunications & information technology industry to respond to demand for
new types of cellular telephones. Nevertheless, controls on spending in electric power resulted in
cuts in investment for the fifth straight year. There were also drops in spending in leasing, where
investment was cut for the first time in four years in response to a severe financing environment,
and in real estate which witnessed a double-digit drop in spending. These factors resulted in an
overall reduction in capital spending in the non-manufacturing sector for the second year
running.
Trends by Industrial Sector
The trends in actual capital spending for FY 1998, classified according to industrial sector, are as
follows. Numbers in curly brackets { } show the percentage of total capital spending accounted
for by each sector.
Materials (down 12.8%) {9.5%}
There was a small increase in the level of total spending in iron & steel. Total spending in thematerials sector declined for the first time in four years, however, reflecting broad cuts in paper& pulp and in non-ferrous metals in addition to reductions in chemicals, which represents a large
portion of materials sector spending.
Looking more closely at iron & steel, this sector increased total spending for equipment
conversions and repairs at large blast furnace steel makers, despite spending controls.
On the other hand, in chemicals there was an increase in investment into pharmaceuticals that
focused on increasing capacity, while in inorganic chemicals there was increased investment intohigh value-added products. But overall spending in this industry fell because of spending controls.
In addition, the paper & pulp industry spending fell broadly as spending to expand continuous
paper manufacturing machinery was completed. Capital spending in non-ferrous metals also
declined because of spending controls related to semiconductor wafer manufacture, which has
been hit by the slow-down in semiconductors, as well as lower cable-related spending. The sizeof spending cuts in the cement, ceramics and glass industry increased as a result of reductions ininvestments to increase efficiency in sectors such as glass, while the textiles industry also reduced
spending mainly in its rationalization.

8

Development Bank of Japan Research Report/ No. 2

Processing & Assembly (down 12.1%) {20.8%}
Spending in the processing & assembly sector turned down for the first time in four years
following substantial spending reductions in electric machinery, which represents a large portionof this sector, along with spending declines in automobiles and food & beverages.
In electric machinery, broad spending cutbacks in electronic parts following restraints on
investment into semiconductors and a pause in investment in liquid crystals, and reactionary
cutbacks in spending for information transmission in electronic devices resulted in a broad
decrease in spending. Spending in automobiles turned down following controls on spending for
four-wheel vehicles, and spending for parts and vehicle bodies remained flat. In food &beverages, capital spending declined by double digit as investment into construction to increase
and improve the efficiency of facilities for the production of beer and alcoholic beverages andprocessed meat products has passed its peak.
In general machinery, spending was curtailed in response to considerable earlier investment
for construction of new buildings in office & household machinery. In precision machinery as
well, where capital spending to strengthen production of high value-added products such as
medical-related devices and watches and measuring instruments continued, overall spending fell
as a result of curbs on investment in semiconductor manufacturing equipment.
Energy (down 9.2%) {17.9%}
The energy sector recorded a decrease in capital spending for the fifth consecutive year.
In the electric power industry, an underlying tone of curbs on investment at Japan’s nineelectric power companies has resulted in large downward revisions for the fifth year running,
despite growth in wholesale electric power providers. In the gas industry as well, investment inproduction and distribution facilities was revised downward and spending decreased. There havealso been large cutbacks in petroleum, due to controls on spending into refining and distribution
facilities.
Non-Manufacturing, excluding Energy (down 4.8%) {51.8%}
Despite higher capital spending in the telecommunications & information industry, total
spending into the non-manufacturing excluding energy fell for the second year running, reflecting
cutbacks in industries such as leasing, real estate, and transportation.
Despite the completion of digitalization in equipment exchange and of investment into the
Personal Handy-phone Systems (PHS), telecommunication & information technology recorded
an increase in capital spending, due to response to the new forms of cellular telephones and head
office-related spending on information services. Wholesale & retail industry, capital spending fell
for the second straight year due to a pause in investment into remodeling of large department
stores, controls on new supermarket construction and cautious expansion at convenience store
chains. In transportation, although there was a small increase in railway investment into
construction projects to build new lines in the Tokyo metropolitan area, total industry spending
fell as airlines reduced investment into planes owned and investment was reduced in warehousing.
In leasing, a tough financial climate resulted in the first spending decline in four years. The realestate industry and the construction industry both experienced double-digit decreases inspending.

Development Bank of Japan Research Report/ No. 2 9

Trends in Capital Spending by Industry Sector
FY1996Growth Rate (%)
FY1997 FY1998 FY1999

FY2000

FY1996

Share (%)
FY1997 FY1998

Materials
Paper & Pulp
Chemicals
Iron & Steel

1.0
36.1
8.9
-19.1

3.6
4.8
14.5
-12.0

-12.8
-33.8
-10.2
0.3

-15.7
-31.1
-11.8
-8.9

-9.8
18.8
0.9
-34.2

9.4
1.2
3.7
2.2

10.0
1.3
4.3
2.0

9.7
1.0
4.3
2.2

8.5
0.7
4.0
2.1

Processing & Assembly
Food & Beverages
Electric Machinery
Automobiles

10.0
-1.1
2.0
22.4

7.3
13.5
-1.1
17.0

-12.1
-12.1
-21.9
-4.2

-7.0
2.4
-1.8
-8.2

-12.0
-8.9
-13.2
-1.6

20.3
2.0
8.2
4.8

21.7
2.2
8.0
5.6

21.0
2.2
7.2
5.9

20.3
2.3
7.3
5.6

EnergyPetroleum
Electric Power

-5.4
-22.0
-2.2

-9.4
-32.2
-7.9

-9.2
-32.5
-8.0

5.0
-21.3
7.0

1.7
-10.4
1.5

19.8
1.7
16.7

17.8
1.1
15.3

17.6
0.8
15.4

19.2
0.6
17.1

Non-Manufacturing
excluding Energy
Construction
Wholesale & Retail
Real EstateTransportation
Telecom.& Information
LeasingServices

10.7
-8.8
10.5
-18.3
12.4
28.0
7.8
-17.8

-2.8
-10.5
-7.0
2.0
-10.2
-6.1
5.1
-5.3

-4.8
-16.6
-1.7
-19.2
-8.8
3.7
-6.5
-7.1

-3.0
-33.7
-11.6
-30.0
11.0
-11.3
7.3
44.3

-8.7
-11.5
-14.2
-13.9
-13.7
-21.2
5.0
-29.6

50.4
1.4
4.9
3.2
8.5
15.2
16.0
1.1

50.5
1.3
4.4
4.6
7.2
14.5
17.3
1.2

51.6
1.2
4.8
4.3
7.0
16.4
16.5
1.3

51.9
0.8
4.4
3.1
8.1
15.1
18.4
1.9

All Industries
excluding Electric Power

6.0
7.8

-1.5
-0.2

-8.0
-8.0

-3.7
-5.6

-5.0
-8.4

100.0
83.3

100.0
84.7

100.0
84.6

100.0
82.9

Manufacturing
Non-Manufacturing
excluding Electric Power

4.8
6.5
9.7

4.1
-4.0
-2.8

-13.0
-5.6
-4.9

-10.1
-0.7
-3.0

-10.9
-4.0
-7.7

31.4
68.6
51.9

32.8
67.2
51.9

31.6
68.4
53.0

29.5
70.5
53.4

FY1999Note 1: Materials: textiles; paper & pulp; chemicals; cement, ceramics & glass; iron & steel; non-ferrous metals
Processing & assembly: food & beverages; general machinery; electric machinery; precision machinery; transportation;other manufacturing
Energy: petroleum; electric power; city gas and coal; crude oil & natural gas
Non-manufacturing, excluding energy: Non-manufacturing industries excluding those industries mentioned in ‘energy’
above
Note 2: Share % for FY 1998 and FY 1999 are based upon 2,923 companies that responded to the survey in both years

10 Development Bank of Japan Research Report/ No. 2

2. Planned Capital Spending for FY 1999
OutlineTaking a look at planned capital spending for FY 1999, both the manufacturing sector and thenon-manufacturing sector are expected to remain in decline, meaning an overall drop (3.7%) for
the third year running.
In the manufacturing sector (down 10.1%), the food & beverage industry will return toincreased spending as a result of construction for new factories for beer and other alcoholic
beverages and other food products. Research and development spending for electronic devices
will increase in the electric machinery industry. Although this spending will help limit the size ofthe total spending decline, spending decreases will be broadened in most industries, such as theautomobile industry where investment into new models are cut and chemicals where spending
controls remain in place in the organic chemicals segment. As a result total investment will fall by
double digit.
In the non-manufacturing sector (down 0.7%), increases in investment are planned in electric
power for the first time in six years as atomic power plant construction projects continue making
good headway. Spending will also increase in leasing, where the financing environment continues
to improve, in transportation for construction of new railways and extensions of existing lines in
the Tokyo metropolitan area, and in services, where spending will grow for large-scale theme
park construction. Nevertheless, capital spending overall will decline slightly because ofreactionary cutbacks in telecommunications & information technology from improved spending
efficiency for transmission technology and systems-related investment in the information services
field, and planned decreases in spending in real estate.
Trends by Industrial Sector
The trends in planned capital spending for FY 1999, classified according to industrial sector, areas follows. Numbers in curly brackets { } show the percentage of total planned capital spending
accounted for by each sector.
Materials (down 15.7%) {8.5%}
The materials sector will record a double-digit drop in capital spending for the second year
running, due in part to decreases in all industries, such as the heavily-weighted chemicals industry,
as well as increases in the size of spending cutbacks in most industries.
In chemical industry, restraints on investment are expected to continue, although investment
in high added-value products continues in organic chemicals, and in pharmaceuticals investment
into construction for expansion of production capacity will fall. In addition, in paper & pulp large
double-digit spending cuts will continue as investment into increased continuous paper
manufacturing capacity was completed in the prior fiscal year, and in non-ferrous metals
semiconductor wafer-related investment and cable-related investment are both expected tocontinue to fall. Cuts are also planned in the cement, ceramics & glass, iron & steel, and textiles
industries, as spending controls continue in the wake of weak demand.

Development Bank of Japan Research Report/ No. 2 11

Processing & Assembly (down 7.0%) {20.3%}
Capital spending in the processing & assembly sector is expected to drop for the second
consecutive year despite a return to higher spending in the food & beverages industry, due to thecontinuation of spending cutbacks in most industries such as the electric machinery industry.
Looking in more detail at the food & beverages industry, spending will increase on thestrength of new factory investment into beer and alcoholic beverages and other food products. In
the electric machinery industry, spending will decline only slightly, even though overall restraints
on investment will remain in place, as the result of increases in areas such as research anddevelopment for electronic devices.
In the automobile industry on the other hand, investment cutbacks will increase sharply as theindustry curtails investment into new models both in four-wheel vehicles and parts/bodies. In
the general machinery industry, large spending cutbacks for machinery such as boilers andmotors will result in a double-digit decline, despite smaller spending declines due to investment
into new machinery products for office & household use. In the precision machinery industry as
well, spending will continue to fall, although steady investment into medical apparatus willcontinue.
Energy (up 5.0%) {19.2%}
The energy sector is expected to show growth for the first time in six years.
In the electric power industry, despite the continuing underlying tone of squeezes oninvestment, an overall increase in capital spending is planned due to the good progress being
made in construction related to the development of power sources such as atomic power stations.
In the gas industry, investment into city gas will increase, but overall capital spending is expected
to fall because of decreased investment into construction of LNG bases and maturity of thesources of supply. The petroleum industry plans overall cuts despite investment into
environmental measures such as reducing the amount of benzene in gasoline, as restraints onspending at refineries are continued.
Non-Manufacturing, excluding Energy (down 3.0%) {51.9%}
Looking at the non-manufacturing sector excluding energy, increases in spending are planned in
the leasing, transportation and service industries. But total spending in this sector will decrease
for the third year running because spending will be cut in the telecommunications & information
technology industry and reductions will continue in the real estate, construction, and wholesale &retail industries.
Capital spending in leasing will increase as the result of improvement in the fund procurement
environment and asset replacements by small and medium-sized leasing companies. In
transportation, capital spending will rise thanks to the construction of new lines and extension ofexisting lines in the Tokyo metropolitan area and the new airport construction. Services
investment will increase substantially thanks to the construction of large theme parts on the water
front areas.
Looking more closely at the telecommunications & information technology industry, despite
the continuation of high spending levels to meet the increase in demand for cellular telephones,
the increase in investment efficiency, declining demand for PHS and completion of information
services systems-related investment mean an overall reduction in capital spending. In real estate,
capital spending will decline substantially, despite the redevelopment in the metropolitan areas,
because of the completion of regional projects. In the construction industry, the major
construction companies are planning to curtail investment and this causes a big overall drop. In
the wholesale & retail industry, there will be selected investments by some department stores and
12 Development Bank of Japan Research Report/ No. 2

supermarkets for new stores and expansion of existing facilities, but overall the lid has been
clamped on spending. Convenience stores as well will continue their cautious attitude towards
new store investment. As the result of these factors, continued overall cuts are expected inwholesale & retail.
Trends and Features of Capital Spending by Industry
Trends and features of capital spending for main industries are shown below. The figures inparentheses ( ) indicate the rate of growth in capital spending for the industry in question (FY1998 → FY 1999). The figures in curly brackets { } show each industry’s share of planned
spending for FY 1999 as a percentage of the total value for all industries.
Materials
Chemicals: (-10.2% → -11.8%) {4.0%}
For organic chemicals, which accounts for the majority of the chemical industry, restraints onspending will continue despite investment into high added-value products. For pharmaceuticals,
spending on construction to increase production capacity has peaked and will decline. Spending
for inorganic chemicals and other chemicals will continue to decrease. Combining all of thesefactors, capital spending in the chemical industry as a whole is expected to decline for the second
year running.
Iron & Steel: (0.3% → -8.9%) {2.1%}
Despite some investment to update and modify facilities, most blast furnace and electric furnace
producers are tightening their investment controls against a background of concerns over excess
capacity. The industry will once again see an overall decline in total spending.
Non-Ferrous Metals: (-25.4% → -26.0%) {0.8%}
In addition to the continuing pause in investment related to cables, the companies will also pause
in their investment related to basic capacity for increasing 300mm semiconductor wafer
production. This will result in a substantial decrease in capital spending for the second
consecutive year.
Paper & Pulp: (-33.8% → -31.1%) {0.7%}
There will be large spending cuts for the second year running, due to the completion of a stringof spending on machines for manufacturing coated paper and newspaper.
Cement, Ceramics & Glass: (-9.5% → -23.0%) {0.7%}
In the glass and ceramic industries, the companies will keep the lid on spending for reasons suchas slack demand. In the cement industry as well, spending will decline sharply in response toconstruction of new electric power generation facilities. For the industry as a whole the size of
spending cutbacks will increase.
Textiles: (-5.4% → -16.4%){ 0.3%}
A keynote of spending controls will continue. Overall there will be a double-digit decrease incapital spending mainly for additional production capacity.

Development Bank of Japan Research Report/ No. 2 13

Processing & AssemblyElectric Machinery: (-21.9% → -1.8%){7.3%}
For electronic parts, which account for the majority of the electric machinery industry, spending
will decline as overall investment controls remain in place. A partial recovery in spending can beseen, however, in some sectors such as liquid crystals. In electric devices difficult businessconditions will continue, and this will translate into a continuation of the double-digit spending
decline. Although overall spending will decline for the third year running, the size of the year-toyear decrease will shrink because of increased spending in some areas, such as research anddevelopment of electronic devices.
Automobiles: (-4.2% → -8.2%) {5.6%}
For four-wheel vehicles, investment to respond to the demand for new types of vehicles has
passed its peak and against a backdrop of industry reorganization the industry has adopted astance of controls on investment spending. Because spending in response to long-term emission
controls on trucks also has ended, total spending will decline for the second year in a row. For
parts/bodies, manufacturers are generally squeezing capital spending, and there is a drop in
spending for new models. As a result, overall capital spending will fall for the second consecutive
year in this industry.
Food & Beverages: (-12.1% → 2.4%) {2.3%}
The size of spending cutbacks for processed meat & dairy products, flour milling, sugar
manufacture, and edible oils will continue to shrink. Capital spending for new factory
construction in sectors such as beer and other alcoholic beverages and other foodstuffs,
moreover, will push the food & beverages industry as a whole into positive growth in spending.
General Machinery: (-6.9% → -15.5%) {2.1%}
For general machinery parts, spending growth will be positive because of large-scale investment
related to partial reorganization of the industry, while the size of spending cutbacks for office &household machinery will shrink because of investment for new products. Spending for boilers
and motors, on the other hand, will show a broad decline as a reaction to prior acquisitions ofland for company headquarters. Coupled with large-scale cutbacks in spending for metal
processing machinery and industrial machinery, capital spending for the general machineryindustry as a whole will fall into a double-digit decline.
Precision Machinery: (-3.3% → -13.9%) {0.5%}
Healthy spending growth will continue for medical instruments. For semiconductor
manufacturing equipment, however, spending cutbacks will continue due to curbs on spending
for semiconductor manufacturing devices. When added to the shift to spending reductions
including cuts in investment to increase production capacity for products such as clocks andother measuring instruments, spending for the precision machinery industry as a whole will
decline for the second year running.
EnergyElectric Power: (-8.0% → 7.0%) {17.1%}
A basic underlying tone of squeezes on investment continues for the nine major electric powercompanies. However, an increase in spending is planned thanks to good headway being made inconstruction projects related to the development of power sources such as atomic power stations.
14 Development Bank of Japan Research Report/ No. 2

There will also be growth in the rest of electric power industry, due in part to healthy progress ininvestment related to nuclear fuel and construction for development of electric power source.
Gas: (-3.7% → -3.3%) {1.4%}
For city gas, increased spending is planned thanks to the full-scale commencement of large-scaleconstruction of LNG bases in some regions. But spending will be sharply curtailed at LNG
suppliers following cutbacks in large-scale construction. Added to on-going curtailment inspending for fuel supplies, capital spending in the gas industry as a whole will fall for the fourthconsecutive year.
Petroleum: (-32.5% → -21.3%) {0.6%}
Although there will be some increases in investment into environmental measures such as
reducing the amount of benzene in gasoline, restraints on investment into refineries anddistribution facilities will continue. Overall, capital spending into the petroleum industry will
decline for the seventh consecutive year.
Non-Manufacturing Industries, excluding Energy
Leasing: (-6.5% → 7.3%) {18.4%}
Amid improvement in the environment for capital procurement, small and medium-sized leasing
companies will increase spending to replace assets and carry out reorganization of their business.
Both bank-related and manufacturer-related leasing companies are also planning capital spending
increases.
Telecommunications & Information Technology: (3.7% → -11.3%) {15.1%}
For telecommunications, which is the mainstay of this industry, a high level of spending will bemaintained to respond to the increase in demand for cellular telephones. However, improvement
in investment efficiency and cuts in investment for PHS will mean a reduction in capital spending.
Companies will be reducing capital spending for information services, on the other hand, afterlarge increases in spending in the previous fiscal year related to system construction and head
offices. This will lead to a downturn in capital spending in the telecommunications & information
technology industry as a whole.
Railways: (1.3% → 18.4%) {5.7%}
Spending will continue to grow thanks to progress in the construction of new lines and line
extensions in the Tokyo metropolitan area.
Wholesale & Retail: (-1.7% → -11.6%) {4.4%}
In wholesale, cuts in investments such as distribution centers will lead to large reductions incapital spending. In retail, department stores have clamped down on spending. Despite theprospect of investment by some supermarkets in new store development ahead of theenforcement of the Large-Scale Retail Store Law (June 2000) and by some volume sellers withnew store development and store enlargement, the continuation of a cautious attitude towards
store investment by convenience stores will result in a spending decline for the industry as awhole for the third year running.
Real estate: (-19.2% → -30.0%) {3.1%}
Although construction of large office buildings is healthily progressing in the Tokyo metropolitan
Development Bank of Japan Research Report/ No. 2 15

area, in general there is a pause in investment and postponement of regional projects, meaning alarge overall drop in capital spending for the second year in a row.
Services: (-7.1% → 44.3%) {1.9%}
Propelled by construction of large-scale, water front theme parks, plus investment in hotels andinns, overall there will be growth for the first time in 8 years.
Warehousing & Transportation: (-19.7% → 48.0%) {0.9%}
Benefiting from investment in new airports and airport-related construction, spending will
increase after 6 years of spending declines.
Construction: (-16.6% → -33.7%) {0.8%}
In construction there will be reduced investment for the seventh straight year, with continuationof restraints on investment and completion of construction for new office buildings by general
construction firms.
Airlines: (-44.0% → 0.4%) {0.7%}
Although the introduction of new aircraft will decline as each company carries out plans toimprove management efficiency, industry spending overall will show a small increase because
carriers plan to increase the percentage of owned aircraft and to increase capital spending for
ground facilities and spare parts.
Marine Transport: (-14.3% → -40.3%) {0.2%}
With the completion of spending on the construction of LNG transport ships, investment will
decline sharply.
3. Planned Capital Spending for FY 2000
Planned capital spending for FY 2000 for all industries shows an overall decrease of 5.0%. In
both the manufacturing sector (down 10.9%) and the non-manufacturing sector (down 4.0%),
however, there are a large number of capital spending decisions that still have not been made.
4. Investment Motives
Investment Motives in the Manufacturing and Non-Manufacturing Sectors in FY 1999
Looking at the respective shares of each category of investment motive for the manufacturingsector in FY 1999, one finds a decrease in “expansion of production capacity” to an
unprecedented low level for most industries. In materials industry particularly, the decrease has
been substantial over the past several years, falling from 33% in FY 1997 to 21% for FY 1999.
On the other hand, there is an increase in “product development and upgrading”, “research &development” and “maintenance” as investment motives. In general machinery and non-ferrous
metals “product development and upgrading” is a substantial motive, but its importance declined
in many other industries. By contrast, many industries, such as automobiles, increased the shareof “research & development” as an investment motive, which can be interpreted as meaning that
although the overall amount of spending will fall, companies will continue spending with eyes on
future business sectors. Increases are also seen in the motives “rationalization and labor saving”
and “maintenance” for many industries.
For the non-manufacturing sector, the motive “expansion of production capacity” which
accounts for about 60% of capital spending will decrease.
16 Development Bank of Japan Research Report/ No. 2

Investment Motives in the Manufacturing Sector for the “Materials” and “Processing &Assembly” Industries
We now look at the respective shares of each category of investment motive within the
manufacturing sector, comparing the materials industry with the processing & assembly industry.
For the materials industry, the motives “rationalization and labor saving”, and “maintenance” areat high levels, whereas for the processing & assembly industry, the incentives “productdevelopment and upgrading” and “research & development” are most important. For thematerials industry, the motive “expansion of production capacity” has become much lessimportant, and now has a lower share than that for the processing & assembly industry. For thecore sectors in the processing & assembly industry, the motives “product development andupgrading” and “research & development” have been growing in importance.
The characteristics of investment motives for the materials industry in FY 1999 are:i) A large reduction in the share of “expansion of production capacity” (27.1% → 20.6%),
particularly for paper & pulp where investment into increasing and improving production
facilities has come to an end amidst concerns about excess capacity, and for chemicals and nonferrous metals (semiconductor-related fields) with restraint of investment.
ii) An increase in “research & development” (7.7% → 8.1%), particularly for industries suchas the chemical industry and the textiles industry.
iii) A rise in the importance of “rationalization and labor saving” (21.1% → 24.0%) in mostindustries including iron & steel, paper & pulp and non-ferrous metals.
iv) An increase for all industries, particularly in chemicals and paper & pulp, in “maintenance”(23.6% → 25.9%).
The significant trends for the processing & assembly industry are:i) A decline in the importance of “expansion of production capacity” (27.8% → 25.4%) in allindustries with the exception of electric machinery, where investment increase can be seen incertain sectors such as semiconductors and liquid crystals.
ii) An increase in “product development and upgrading” (21.0% → 21.1%) for generalmachinery, where investment related to consumables for office automation equipment such as
copiers will increase, and food & beverages, where spending will increase in selected areas.
iii) A small increase in “research & development” (12.6% → 12.7%) in many industries
including automobiles.
Shift in Investment Motives within the Manufacturing Sector
We now look at the change in the percentage share of each category of investment motive for the
manufacturing sector. For “expansion of production capacity”, there are increases for electricmachinery and petroleum. There are drops for most industries, however, including paper & pulp,
chemicals, and automobiles. Overall there is a large reduction from 27.7% to 24.1%.
For “product development and upgrading”, there are decreases for electric machinery andautomobiles. There are increases, however, for other industries including general machinery andnon-ferrous metals, meaning an overall increase from 15.5% to 16.0%.
“Rationalization and labor saving” is up from 18.4% to 18.8% for all industries, thanks to anincrease for most industries including iron & steel, paper & pulp and precision machinery. The
importance of this motive decreased in the electric machinery and the food & beverages industry,
however.
For “research & development” there are rises for most industries, including the highly
influential, chemicals and automobile industries, resulting in an overall increase from 10.4% to10.7%.
Development Bank of Japan Research Report/ No. 2 17

“Maintenance” as a spending incentive shows an increase from 15.9% to 16.7%, due to rises
for the majority of industries particularly for the materials industry such as chemicals and paper &pulp.
Investment Motives(Unit: %)Total

Manufacturing

Non-Manufacturing(2,158 firms)

Materials

Processing & Assembly

FY98

FY99

FY98

FY99

FY98

FY99

FY98

FY99

FY98

FY99

ActualPlannedActualPlannedActualPlannedActualPlannedActualPlanned

Expansion of Production
Capacity

53.8

52.8

27.7

24.1

27.1

20.6

27.8

25.4

64.5

62.8

Product Development
and product upgrading

6.4

6.9

15.5

16.0

7.7

8.6

21.0

21.1

2.7

3.7

Rationalization andLabor Saving

7.1

7.0

18.4

18.8

21.1

24.0

17.0

16.3

2.5

2.8

Research & Development

3.6

3.4

10.4

10.7

7.7

8.1

12.6

12.7

0.9

0.8

Maintenance

15.1

14.5

15.9

16.7

23.6

25.9

10.2

10.6

14.7

13.7

Others

14.0

15.5

12.1

13.7

12.8

12.9

11.4

13.9

14.8

16.2

Total

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

18 Development Bank of Japan Research Report/ No. 2

5. Trends in Land Investment (Classified According to Principal Business Sector)
Actual Land Investment for FY 1998
Actual land investment for FY 1998 (based on figures for the 1,756 firms that gave responses
regarding both FY 1997 and FY 1998) was down 4.3% compared with the previous year, thesecond consecutive annual decline. The size of the decrease was smaller, however. In the
manufacturing sector there was an 11.7% decrease, reflecting reductions in chemicals, petroleum
and electric machinery. In the non-manufacturing sector, the size of the decrease became smaller(-2.3%) thanks to land acquisitions for large company-owned buildings in wholesale & retail andtelecommunication & information technology in addition to land acquisitions for electric power.
As a whole, there were land purchases related to development of former railroad properties orbusiness reorganization, and land investment accounted for 8.5% of capital spending, the highest
level since FY 1991.
Planned Land Investment for FY 1999
Planned land investment for FY 1999 (based on figures for the 2,210 firms that gave responses
regarding both FY 1998 and FY 1999) is down 54.6%, a large decline from the prior fiscal year.
(Land investment accounts for 4.1% of all investment planned for FY 1999.) With the exceptionsof the electric machinery industry, where large amount of land has been acquired for company
premises, and land investment in the transportation industry for the new airport facilities, nolarge acquisitions are planned.
It should be noted that there is a tendency for large upward revisions in land investment
between the planning stage and actual implementation.
Planned Land Investment for FY 2000
Planned land investment for FY 2000 (based on figures for the 1,297 firms that gave responses
regarding both FY 1999 and FY 2000) is down 33.9% on the previous year. (Land investment
accounts for 3.2% of all investment planned for FY 2000.) Planned land investment for FY 2000
is even more uncertain than for FY 1999, however.

Development Bank of Japan Research Report/ No. 2 19

Trends in Land Investment (Classified According to Principal Business Sector)
FY1997
FY1998(Actual) (Planned)(1,756 firms)

GrowthRate (%)
98/97

FY1998FY1999(Actual) (Planned)(2,210 firms)

GrowthRate (%)
99/98(Units: 100 million yen)
FY1999FY2000Growth(Actual)(Planned) Rate (%)(1,297 firms)
2000/99

Total
Total Investment

175,284

162,733-7.2

179,637

171,823-4.3

91,40387,011-4.8

Investment except Land160,809148,880-7.4

164,117

164,778

0.4

87,13684,191-3.4

Investment in Land

14,475

13,853-4.3

15,521

7,046

-54.6

4,267

2,820

-33.9

(Share of Land %)

(8.3)

(8.5)

(8.6)

(4.1)

(4.7)

(3.2)

Total Investment

56,62650,373-11.0

57,99050,717-12.5

13,843

12,002

Investment except Land53,59047,691-11.0

54,63849,264-9.8

13,135

11,953-9.0

Investment in Land

3,036

2,681

-11.7

3,352

1,453

-56.7

707

49

-93.0

(Share of Land %)

(5.4)

(5.3)

(5.8)

(2.9)

(5.1)

(0.4)

Total Investment

118,658

112,361-5.3

121,647

121,106-0.4

77,56075,008-3.3

Investment except Land107,219

101,189-5.6

109,478

115,513

5.5

74,001

72,237-2.4

Investment in Land

11,439

11,172-2.3

12,169

5,593

-54.0

3,600

2,771

-22.2

(Share of Land %)

(9.6)

(9.9)

(10.0)

(4.6)

(4.6)

(3.7)

98

99

Manufacturing-13.3

Non-Manufacturing

Growth Rate of Investment in Land
Total of All Industries
93

94

95

96

97

20
2000

30
20

18.1

10
0

-4.3

-10
(%)

-20
-30
-40
-50

-16.5

-11.1

-14.8
-21.3

-24.5

-33.9

-30.5
-40.0
-43.4

-39.9
-42.5

-38.2

-36.8

-40.7
-47.5

-41.0
-47.9
-54.6

-60

-66.6

-70
-80
Actual (Survey in August of the Following Year)
Planned (Survey in August of the Same Year)
Planned (Survey in August of the Previous Year)

20 Development Bank of Japan Research Report/ No. 2

FY

6.

Foreign Direct Investment and Capital Spending Abroad (Classified According to
Principal Business Sector)
Foreign Direct Investment
Foreign direct investment rose 8.0% from ¥1,095.1 billion in FY 1998 to ¥1,182.4 billion in FY
1999 (based on figures for the 1,246 firms that gave responses regarding both FY 1998 and FY
1999). (The manufacturing sector increased by 42.5%, while the non-manufacturing sector
decreased by 68.2%.) In the manufacturing sector, which accounts for the majority of foreign
direct investment in the survey responses, there was a large decline in foreign direct investmentof 32.9% for materials industry, with the most significant drops being in the non-ferrous metals
and chemicals industry. In the processing & assembly industry, investment rose significantly by
70.2%, based upon large increases in food & beverages, however, for the non-manufacturingsector, there was a large decline of 68.2%, with large drops in construction and wholesale &retail.
Capital Spending Abroad
There was an overall drop in capital spending abroad of 11.3% from ¥1,130.2 billion in FY 1998
to ¥1,002.1 billion in FY 1999 (based on figures for the 1,174 firms that gave responses
regarding both FY 1998 and FY 1999). (The decrease for the manufacturing sector was 16.3%,
while the non-manufacturing sector rose 19.7%.) In the manufacturing sector, there was a decline
in capital spending abroad of 4.6% for the processing & assembly industry, with a significant
drop occurring in the general machinery industry. For the materials industries, there was a big
decline of 47.6%, with the most significant drops in the non-ferrous metals and textiles industries.
In the non-manufacturing sector, a broad increase in the transportation industry contributed to a
19.7% increase in capital spending abroad.
The ratio of capital spending abroad to domestic capital spending within the
manufacturing sector
Looking at the ratio of capital spending abroad to domestic capital spending for the
manufacturing sector (based on figures for the 485 firms that gave responses regarding both FY
1998 and FY 1999), there is a drop of approximately two percentage points from 33.3% in FY
1998 to 31.2% in FY 1999. For the processing & assembly industry there is an increase from
37.5% to 39.5%, with major contribution coming from electric machinery and transportation.
For the materials industry, the ratio falls from 26.8% to 16.4%, due in part to the large decreases
for non-ferrous metals and textiles.
Note: ‘Foreign direct investment’ by a company refers to remittance of funds for theestablishment of overseas offices, as well as loaning and investment of securities(stocks and bonds) into overseas subsidiaries. (Here, an ‘overseas subsidiary’ of acompany is an overseas firm for which the company holds at least 10% of the shares.)‘Capital spending abroad’ by a company refers to capital spending conducted
overseas by either the company itself or one of its overseas subsidiaries. (Thedefinition of ‘overseas subsidiary’ is as above.)

Development Bank of Japan Research Report/ No. 2 21

7.

Trends in Capital Spending by Foreign-Affiliated Firms (Classified According to
Principal Business Sector)
142 firms out of 2,923 who responded to both FY 1998 and 1999 surveys are classified as
foreign-affiliated firms (firms with over one third foreign ownership). Their capital spending
accounts for 2.1% of the total (FY 1999).
Planned capital spending by foreign-affiliated firms in FY 1999 is 9.5% higher than in theprevious fiscal year. Looking at by separate industry, there are drops for chemicals and othermaterials industries (down 19.1%) and energy (down 7.1%). On the other hand, there is anincrease in processing & assembly (up 10.3%) as a result of increases for transportationequipment and electric machinery, together with a large increase in non-manufacturing excluding
energy (up 68.3%) because of planned spending for large-scale theme parks.
Planned capital spending by foreign-affiliated firms in FY 2000 is down 3.6% from theprevious year.
Capital Spending by Foreign Affiliated Firm (Classified According to Principal Business
Sector)Capital Spending (hundred million Yen)
FY97
(Actual)

FY98(Actual)(121 firms)
Total

Growth rate (%)

FY98
FY99
FY99
FY2000(Actual) (Planned) (Planned) (Planned)(142 firms)
5,392

98/97

99/98

Share(%)

2000/99(88 firms)

5,452

4,158

4,923

Manufacturing

4,163

3,558

4,028

Non-Manufacturing

1.290

600

895

Materials

1,306

1,446

1,563

1,265

Processing & Assembly

1,929

1,569

1,897

2,094

653

EnergyNon-Manufacturing
excluding Energy

928

543

567

527

350

1,290

600

895

1,506

1,013

957

-23.7

9.5

-3.6

FY99
(142
firms )(of AllFirms)

100.0

2.1

2,503

2,412

3,885

1,490

1,455

-14.5

-3.5

-2.3

72.1

5.1

1,506

1,013

957

-53.5

68.3

-5.6

27.9

0.8

487

671

10.7

-19.1

37.8

23.5

5.4

541

-18.7

10.3

-17.2

38.8

4.1

244

-41.4

-7.1

-30.5

9.8

1.1

-53.5

68.3

-5.6

27.9

1.1

By sector

Note: foreign-affiliated firms are firms with over one-third foreign ownership

22 Development Bank of Japan Research Report/ No. 2

List of Back Numbers (Including JDB Research Report)
No.2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000

(This Issue)

No.1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other
Asian Countries, November 1999

JDB Research Report
No.96

Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August
1999

No.95

Efforts to Protect the Natural Environment in the United States and Germany: Environmental
Mitigation and Biotope Conservation, July 1999

No.94

Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999

No.93

Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO
sector through comparison with Germany, June 1999

No.92

The Impact of Demographic Changes on Consumption and Savings, March 1999

No.91

Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March
1999

No.90

Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999

No.89

Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between
Japan and the U.S., December 1998

No.88

Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998

No.87

Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998

No.86

Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998

No.85

Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998

No.84

R&D Stock and Trade Structure in Japan, August 1998

No.83

Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998

No.82

The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public
Acceptance is Essential, May 1998

No.81

The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997 and1998 Conducted in August 1997, March 1998

No.80

Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998

No.79

Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January
1998

No.78

Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series andEnvironmental Cost, January 1998

No.77

Current Conditions and Issues of Computerization in the Health Care Industry : For theConstruction of a Health Care Information Network, January 1998

No.76

Household Consumption and Saving in Japan, December 1997

No.75

The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to
Support Diverse Consumer Choices, November 1997

No.74

Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on
International Trade, October 1997

No.73The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on the
Effects on Productivity and Employment, October 1997

No.72

An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997

No.71

Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of
Economic Recovery, August 1997

No. 70 Corporate Fundraising : An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm
Date from Japan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March 1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulation of
the Electric Power Industry in Japan and Implication of Experiences in the United States,
December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key,
October 1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of theCurrent Economic Recovery, September 1996
No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the
United States and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY 1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and 1996
Conducted in February 1996, May 1996
No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995 and1996 Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October 1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October
1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY 1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part2, July
1995
No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery
Industry, June 1995

No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and 1995
Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March 1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private Level,
May 1994
No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994 and1995 Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY 1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and 1994
Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration,
December 1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993 and1994 Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and 1993
Conducted in March 1993, April 1993
No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992 and1993 Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992
No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and 1992
Conducted in February 1992, April 1992
No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s, February
1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991 and1992 Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and 1991
Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990 and1991 Conducted in August1990,September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment andTechnology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and 1990
Conducted in February 1990, March 1990

No. 18 Petrochemicals In Japan, The US, and Korea an Assessment of Economic Efficiency, February
1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989 and1990 Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly
Industrializing Economies, August 1989
No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years
1988 and 1989 Conducted in February 1989, March 1989
No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988 and1989 Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and ASEANCountries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987