TOKYO Japanese companies are enthusiastic about Prime Minister Shinzo Abe's economic-growth plans, although they remain cautious about boosting wages or investment - two elements that are key to securing a sustainable recovery, a Reuters survey showed.
The Japan Inc brownie points for Abe come nearly exactly one year after he jolted financial markets with an election campaign that promised bold policies and then followed through with massive monetary easing and hefty fiscal spending.
Companies are now enamoured with the potential of the third stage in "Abenomics" - a planned slew of reforms encompassing tax, labour and deregulation, saying they are hopeful the measures will provide a catalyst for change.
"We are not in complete agreement, but we feel that just creating the sense that business conditions are improving is a step forward," wrote an executive at a metals and machinery firm.
That sentiment was echoed by many firms in the Reuters Corporate Survey, which showed nearly three-fourths of the 247 companies answering a question on Abe's growth strategy said it was "commendable" or "very commendable".
Abe's monetary and fiscal policies aimed at breaking a 15-year run of deflation and tepid growth helped lift Tokyo stocks 72 percent and push the yen down 20 percent over the past year.
In recent months, however, financial markets have greeted Abe's longer-term growth strategy with more scepticism, believing many of the reform measures will be watered down.
A GLASS ONE-QUARTER FULL
The survey showed it was much less clear how far Japan Inc will follow through with action that Abe's policies are designed to spur.
About one-fourth of the companies in the survey, conducted from October 25 to November 11, said they will boost capital spending - a result that underlines that some progress has been made.
"The biggest change from a year ago is that firm's outlooks for the future have gotten brighter, the biggest part of that being that many have increased their capital investment plans," said Akihiro Morishige, an economist at Mitsubishi Research Institute who reviewed the poll results.
But at the same time, that one quarter of companies is not enough to ensure a lasting recovery and recent business investment figures have been disappointing.
Capital spending has climbed for three straight quarters but only showed growth of 0.2 percent in July-September, well below expectations, while core machinery orders, a key predictor of capital spending, fell more than expected in September, data this week showed.
In response to the same question on how business plans may change - a question that allowed for multiple answers - one quarter of companies also said they plan to strengthen their domestic businesses, another small feather for the Abenomics cap.
But just 8 percent said they would raise wages. The portion of companies that plans to lift their number of permanent employees was also only 8 percent.
HARD TO ENACT
The mixed results come as Abe struggles to deliver on his growth strategy, key parts of which are currently before parliament.
He watered down a plan to cut Japan's corporate tax rate, making it a longer-term goal, on resistance from the Finance Ministry, which is trying to rein in the country's runaway debt.
A plan to create "special zones" where firms can enjoy tax breaks and exemptions from regulations also faced resistance. A provision to relax labour rules in the proposed zones, making it easier for companies to lay off employees, faltered after an outcry from media and labour unions that it would undermine Japan's highly prized job security.
One unambiguous success for Abenomics has been the yen - which has weakened to around 100 yen to the dollar from 79 yen a year ago, making Japan's exports more profitable and inflating the value of overseas earnings in terms of the local currency.
Just over half the companies in the Reuters survey said they prefer the yen to trade around current levels with a further one-fourth favouring a slightly stronger yen. Over 60 percent forecast the yen will stabilize around current levels for the six months to March.
The poll was taken alongside the monthly Reuters Tankan survey, which showed on Thursday that confidence among Japanese firms rose for the first time in three months in November and is seen improving further over the next three months.
The corporate survey, which is conducted by Nikkei Research for Reuters, polls upper management at 400 companies each capitalised at more than 1 billion yen. The firms, split evenly between manufacturers and non-manufacturers, provide responses on condition of anonymity.
(Additional reporting by Tetsushi Kajimoto; Editing by William Mallard and Edwina Gibbs)