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Japan’s biggest companies plot 16% jump in tech investment

From retail to construction, coronavirus accelerates digital revolution.

7-Eleven is Japan's largest convenience store chain operator. Image credit to 123rf.com.cn.

Despite uncertainties from COVID-19, top Japanese corporations plan to invest 15.8% more in information technology in fiscal 2020 to keep up the wave of digitization across industries.

A total of 765 enterprises aim to spend JPY 471.8 billion (USD 4.45 billion) on tech, shows a Nikkei survey of publicly traded companies and those with 100 million yen or more in capital. This marks a second straight year of double-digit growth.

Manufacturers are on track to a record 20.3% jump, while nonmanufacturers plan a 13.1% increase.

But overall capital investment is set to fall 1.2% to JPY 19.24 trillion across a broader swath of 948 companies — the first decline since fiscal 2016, when the UK voted to leave the European Union.

With the pandemic disrupting flows of people and goods, companies are turning to technology to adapt sales and distribution channels to the new normal.

Seven & i Holdings, the company behind 7-Eleven convenience stores, plans a 19.9% increase in tech investment to JPY 121.2 billion — the largest sum of anyone on the list. It aims to introduce dynamic pricing for home deliveries and to reduce the burden on delivery staffers.

Kubota will invest 20.8 billion yen, or 140% more, in tech, partnering with Microsoft to globally manage production and sales for its farming and construction equipment. General contractor Taisei will spend 17.1% more so that it can track construction projects remotely, reducing the need for workers.

Investment in technology is only accelerating, given that businesses that have embraced digitization are the ones doing the best in this pandemic.

“Business leaders are being forced to adapt to the coronavirus, and they now realize the importance of digital transformation,” said Saisuke Sakai of the Mizuho Research Institute. “IT investment could grow even more in the future.”

It will be critical for Japan to bolster its telecommunications infrastructure to allow continued progress in IT. Fujitsu will invest 14.1% more in overall capital spending, or JPY 110 billion, in order to build new data centers and take other steps.

But some companies face dwindling resources, owing to the pandemic. Japan Airlines will halve capital investment to 120 billion yen in fiscal 2020 so that it can prioritize cash on hand. “We have no choice but to cut investment when we can’t fly our planes,” President Yuji Akasaka said.

Sony will reduce capital investment by 2.5% to JPY 500 billion, partly on an expected decrease in image sensor sales to China’s Huawei Technologies.

Some companies, like Aeon and East Japan Railway, or JR East, did not provide capital investment plans, citing uncertainties in the business environment.

This article first appeared on Nikkei Asian Review. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei. 36Kr is KrASIA’s parent company.