Japan says high oil prices hitting profits

TOKYO: High oil prices are eating into Japanese corporate earnings, which may prompt firms to reduce their business investment, Japan's economic and fiscal policy minister said on Tuesday.

"It's not only corporate sentiment that is worsening, oil prices are having a real negative effect on corporate profits, especially small and medium-size businesses," Hiroko Ota said at a press conference.

Amid the worsening business climate, companies may cut their spending on new equipment and factories, she said.

"For now, it's still just sentiment toward spending that is weakening, but it is likely that spending, too, will slowly be affected."

A government survey released Monday showed sentiment among top Japanese executives at the worst level in at least four years, adding to concerns about the outlook for Asia's largest economy.

Japan's corporate sector has been a key driver of the recovery in the world's second-largest national economy after a decade-long slump.

But firms are now struggling to cope with the rising cost of energy and raw materials, a weaker global economy and a stronger yen, which is bad for overseas earnings.