tokyo

Rising sum: yearly increases in R&D spending. Credit: STA

Despite being hit by its worst economic crisis since the Second World War, Japan's overall industrial research spending is rising steadily, according to a survey released last week by the Science and Technology Agency (STA).

The survey, based on data from more than 1,900 companies, says the total spending on research and development (R&D) for the 1997 fiscal year, which ended in March 1998, increased by 8 per cent from 1996, marking the third consecutive year of growth in industrial R&D expenditure (see graph).

The increase was centred on medium-sized and large companies with annual R&D budgets of more than ¥3 billion (US$21 million), and on the transport and electronics sectors, which increased spending by 22 per cent and 12 per cent, respectively. Most companies with a budget of less than ¥3 billion have scaled down their R&D expenditure with the weakening of the Japanese economy, however.

The survey also says that Japanese companies have started to give more priority to R&D as part of their corporate strategy. Almost 90 per cent of companies surveyed have reorganized their R&D strategy in the past three years, of which 70 per cent — mostly in the transport, electronics and communications sectors — have made R&D their top priority.

This trend has been confirmed by a recent survey on corporate R&D by the daily business newspaper Nikkei Sangyo Shimbun, which indicates that more than 75 per cent of 442 companies surveyed claim to have increased their emphasis on R&D since 1995.

In both surveys, companies cite the development of innovative technologies and the creation of products that meet their market needs as the main reasons for raising the priority of R&D. Factors such as strengthening basic research and diversification of research areas were deemed less significant. This reflects the fact that companies' increased support for R&D is driven by their desire to strengthen application-orientated research.

Reiji Sano, managing director of Matsushita Electric Industrial Co., agrees that an increase in R&D expenditure has been accompanied by a shift towards applied research. “We are focusing our effort towards developing new technologies,” he says.

STA warns in its report that the economy has deteriorated further since the survey was conducted early this year, and cautions that the actual increase in R&D spending for the full financial year may have been slightly less than that reported. But most companies say their R&D budgets remain relatively unscathed, despite the deepening recession.

According to a spokesman for the electrical manufacturer NEC, which increased its R&D budget by 9.4 per cent this year, the investment was planned on a 20-year basis and is unlikely to be affected by movements in the economy — “unless our profits really do plummet”.