TWO out of five Japanese firms plan to boost capital spending this business year, and more than a third of those say it is because of rising demand, a Reuters poll showed, pointing to a pickup in confidence about the economy.

    But tempering that upbeat view was a warning from about one-quarter of respondents that their sales are so far undershooting their business plans for the year that started in April. In contrast, just one-eighth of respondents said they were ahead of plan.

    The latest Reuters Corporate Survey could offer some relief to Japanese policymakers who are anxious for companies to spend their cash hoards on plant and equipment, rather than hold them in reserve as they fret over Greek debt and swingy Chinese stock markets.

    Capital spending has long been the missing link in Japan’s drive for a virtuous cycle of business investment, household income growth and consumer spending to pull the world’s third-largest economy out of nearly two decades of deflation.

    “This is a positive surprise. Companies are aiming to boost investment at home in anticipation of higher demand,” said Taro Saito, director of economic research at NLI Research Institute, who reviewed the results.

    “Capex plans look really strong but the question is whether they are going to be implemented. I have doubts when seeing that sales are already undershooting plans.”

    Japanese companies draft capital spending plans at the start of the April-March business year, which are typically cautious, and revise them if revenue and profits diverge from initial expectations.(SD-Agencies)