Debt is not a dirty word
Japanese companies are now creditworthy and the banks are recapitalized but neither side seems keen to enter into loan transactions. But companies can see the long-term value of establishing access to capital markets. And lenders are keen to repackage and redistribute credit risk in new ways and define a new relationship with corporate customers. Peter Lee reports
IN THE FIRST weeks of 2006, it seemed that leading Japanese companies had engaged in some strange competition to outdo each other with announcements of ever more extravagant new investments.
Fujitsu unveiled plans to spend ¥120 billion ($1 billion) over two years to boost microchip production in central Japan. Matsushita Electric Industrial trumped it by announcing it would invest ¥180 billion in a new plant to build plasma display panels in western Japan. Sharp upped the stakes: it intends to invest ¥275 billion to increase production at its liquid crystal display factories. And so it goes on – steel companies, industrial companies, technology companies.
It is the continuation of a trend among Japanese manufacturers that first began in the second quarter of 2003 to replace and upgrade ageing plant and machinery and expand capacity in markets where new demand is evident, such as TVs, digitized home electronics and hybrid cars. Japanese companies are spending ¥1.25 trillion a year more on replacement capex than they were at the start of the century.