Japan Inc. continues to spend big on R&D despite the recession

Posted by: Ian Rowley on August 5, 2009

Despite the severity of the global recession, Japanese companies have been reluctant to slash research and development budgets. Indeed, while the downturn, which led to a sharper fall in Japan’s GDP than any other industrialized economy, has led to unprecedented cutbacks and a sharp rise in unemployment, R&D spending is contracting far less quickly than sales. A survey of 253 large companies by Nikkei Inc, released yesterday, found that R&D spending will likely fall 6.5% this fiscal year, compared to an 11.8% plunge in sales.

The survey found that the 253 firms plan to spend a combined $115 billion in the year through March 2010 which, while representing the first year-on-year dip in a decade, is the highest level of R&D spending as a proportion of sales since 2001. The R&D-to-sales ratio is also higher than in 2008 when Japanese companies collectively posted record profits.

Unsurprisingly, alternative energy and other eco-friendly technologies are attracting much of the investment. Among respondents to the survey, 58% said they are spending research dollars in “energy saving” technologies. Meanwhile, 46.5% are investing in “new energy” (Multiple answers were allowed). Research into new materials and nanotechnology are also proving attractive.

That’s not to there hasn’t been an overhaul of how research funds are being allocated. Automakers, for instance, say they are more focused in how they use up budgets. At Honda, spending on hybrids, which the company considers a key technology and related technologies, which the company consider to be key to its future success, have been unaffected by the downturn. However, plans for diesel engines for the U.S. and Japanese market have been shelved and it has also abandoned plans to develop a successor to the NSX supercar. Still, that doesn’t mean all non-core research projects have been blocked. In March, when Japan’s economy was in free fall, Honda showed off a mind-reading robot at its Tokyo offices.

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