Japanese corporate profits in the January-March period logged their first year-on-year gain in eight quarters, driven by a strong recovery by the manufacturing sector from a coronavirus-induced slump, government data showed Tuesday.
Pretax profits of domestic companies covered in the Finance Ministry's quarterly survey rose 26.0 percent to 20.07 trillion yen ($183 billion) from a year earlier, the sharpest growth since a 26.6 percent increase in the January-March period in 2017, according to the ministry.
The rise was largely due to an advantageous year-on-year comparison. Pretax profits had dived 28.4 percent in the first quarter of 2020 as the virus began to spread, hitting social and economic activities.
The manufacturing sector posted a 63.2 percent expansion in pretax profits, following a 21.9 percent rise in the previous quarter. The transportation equipment sector including the auto-related industry saw an almost threefold rise on the back of rebounding car exports amid a global economic recovery from the pandemic shock.
Pretax profits of nonmanufacturing firms climbed 10.9 percent, turning positive after an 11.2 percent fall in October to December. The service industry saw a 40.6 percent rise, believed to be boosted by a huge profit earned by investment giant SoftBank Group Corp.
Excluding pure holding companies such as SoftBank Group, pretax profits of service providers including restaurants and hotels fell 16.6 percent, a ministry official told reporters, taking a blow from a decline in customers as people were requested to stay at home amid the pandemic.
The government's second coronavirus state of emergency was issued to 11 prefectures including Tokyo, effective from early January to late March. Under the measure, restaurants and bars were asked to shorten operating hours and private consumption was dented.
Corporate sales in Japan sank 3.0 percent from the previous year to 334.25 trillion yen, down for the seventh successive quarter. Sales by manufacturers declined 1.4 percent, while those by nonmanufacturers dipped 3.6 percent.
Capital spending by all nonfinancial sectors for purposes such as building factories as well as adding equipment and software dropped 7.8 percent to 14.47 trillion yen, down for the fourth quarter in a row.
On a seasonally adjusted basis, such spending inched down 0.4 percent from the October-December term, when it also fell 0.4 percent. It was the fourth successive quarterly drop.
Taking into account the latest capital spending figures, the Cabinet Office is scheduled to release revised gross domestic product data for the same quarter on June 8.
Preliminary data showed the country's economy shrank an annualized real 5.1 percent in the three-month period, the first contraction in three quarters, as the government's second state of emergency over the coronavirus pandemic hit consumption.
The ministry surveyed 31,777 companies capitalized at 10 million yen or more, of which 22,269, or 70.1 percent, responded.
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