71% of major Japanese companies expect economy to improve in 2021: Mainichi survey

TOKYO -- A total of 71% of 118 major Japanese companies surveyed by the Mainichi Shimbun believe the economy will improve in 2021, while only 5%, or six firms, expected worse ahead.

The optimism is founded on projections that, despite increasing coronavirus cases at present, things may get better than they were during the economic deep freeze that Japan entered in the spring of 2020, when businesses were forced to curtail their activities as people abided by stay-at-home requests. However, in a sign of the continued worries over the coronavirus's impact, most of the firms surveyed also said they believe it will take time to return to pre-pandemic economic conditions.

The paper-based survey was conducted from mid-November to late December last year.

The coronavirus pandemic pushed Japan's economy into negative growth territory for 2020, the nadir being a minus 29.2% annualized growth rate for the April to June quarter, which included April and May's nationwide state of emergency. But the country's gross domestic product has remained on a recovery trend since then.

"There was a severe economic drop in fiscal 2020, so we project opposite movement in the direction of growth in fiscal 2021," wrote insurer T&D Holdings Inc., while Tokyo Marine Holdings Inc. stated, "New business models are gradually progressing, and we expect growth based on rising consumer and foreign demand."

However, respondents continued to feel the impact of the resurgence of infections domestically and internationally, including requests to shorten restaurants' business hours as part of coronavirus countermeasures. Mitsubishi Electric Corp. stated, "With no clear picture of when the infection situation will be resolved, we find it difficult to say that consumption and private investment will recover" -- one among many opinions that tied expectations of a true recovery to resolution of the coronavirus crisis.

When asked to choose a maximum of three major economic worries for 2021 from a list, 95%, or 112, of the responding companies selected "the novel coronavirus spreading." Fifty-six percent, or 66 firms, chose "slumping consumption," while 29 companies, or 25% of the respondents, named "worsening U.S.-China relations."

As to the coronavirus specifically, construction and civil engineering firm Kajima Corp. wrote, "We are concerned that (COVID-19) vaccine and treatment development and deployment could be delayed, causing extended sluggish individual consumption and capital investment." One major bank stated, "Another state of emergency declaration could be in the offing if there is a significant spike in severe COVID-19 cases, which would inflict an unavoidable hit on a wide range (of economic factors), from corporate earnings to incomes, employment and consumption."

These misgivingsare expressed in the sharp differences in capital investment plans between the last survey results released in January 2020 and the 2021 edition.

Fourteen percent of the companies this time around said they intended to boost capital investment at home or abroad in fiscal 2021 (starting in April this year), as against 17% who said the same for fiscal 2020. Nineteen percent of responding firms said they would hold the line in the upcoming year, compared to 24% in the last survey. And 8% said they would cut capital investment, as against the 4% that said so for 2020.

Meanwhile, 47 companies, or 40%, stated they could not answer the question (compared to 33% last year), suggesting many firms, facing an opaque outlook, are taking a wait-and-see approach.

"We will continue a certain level of replacement investment, but where that will go remains unclear, and we have no plans for aggressive investment activities," stated shipping firm NYK Line. Materials manufacturer AGC Inc. wrote, "Growth in demand is slowing due to the coronavirus, so we have put off investment in building up and strengthening our capacity."

(Japanese original by Daichi Matsuoka, Business News Department)