Japanese firms' pretax profits drop for 1st time in 8 quarters on soaring energy, raw material costs

TOKYO, March 2 (Xinhua) -- Japanese firms' pretax profits declined 2.8 percent from a year earlier in the October to December period, the government said in a report on Thursday.

The reading marked the first drop in eight quarters, with the decline owing to soaring costs for energy and raw materials inflated by a weak yen, with manufacturing firms involved in these materials unable to completely offset their rising costs to consumers.

For all sectors, the data showed pretax profits totaled 22.38 trillion yen (164.13 billion U.S. dollars) for the October-December quarter, the second-highest on record for the period.

Capital expenditure by both manufacturers and non-manufacturers in the recording period rose, the data showed, increasing 7.7 percent to 12.44 trillion yen.

This marked the seventh successive quarter of increase, according to the government's latest data.

A rise in capital expenditure can boost the economy as Japanese companies are producing more machinery to meet rising demands from overseas markets.

A drop in such expenditure, meanwhile, can have the reverse effect.

The data is keenly eyed by the government as a gauge of demand, with such business investment accounting for roughly 15 percent of Japan's economy.

The firms' investment outlays also inform the government's preliminary gross domestic product (GDP) and subsequent revised GDP data, with the latter, in this instance, scheduled for release on March 9.