Quote:Japanese businesses cutting investments in Thailand due to strong baht - survey

BANGKOK (Thomson Financial) - Japanese companies in Thailand are beginning to reduce their investments in the kingdom due to the strong baht and negative perceptions about the investment climate, a survey said Wednesday.

Japan is Thailand's biggest foreign investor, but a survey of the 351 members of the Japanese Chamber of Commerce found that business sentiment in Thailand is 'deteriorating' for the first time since 1998.

Japanese businesses saying their investments in Thailand would decrease, outnumbered those planning to increase capital spending here, according to the survey conducted by the Japan External Trade Organization (Jetro)

The value of planned Japanese investments in Thailand this year has already fallen 11 percent from 2006, the survey said.

'It was the first time in nine years that we found those results, with sentiment deteriorating continuously,' Jetro Bangkok president Yoichi Kato told reporters.

'We found the willingness to invest declined compared to a year before,' he added.

The twice-yearly survey, conducted from April 27 to May 23, found the appreciation of the baht was the top concern for Japanese companies in Thailand, followed by political instability, economic policies and rising labor costs.

'Japanese firms view that the exchange rate of 37.25 baht to the dollar is a profitable rate. But the current market rate of 34.49 baht makes them lose 7.4 percent in profits,' Kato said.

Kiyoharu Yukiyoshi, executive director of JCC Bangkok, said Japanese firms have adopted a wait-and-see stance before making new investments in Thailand.

'We will probably wait until the election before making a decision whether to raise investments in Thailand. Hopefully, Thailand will have the election in November as the prime minister promised,' Yukiyoshi told Agence France-Presse.

'Baht appreciation is our major concern at the moment. There will be a bigger opportunity for us to move to Vietnam if the baht gets stronger,' he added.

Strong economic data released over the last week has helped push the Thai stock market to a 10-year high, but foreign inflows to the market have sent the baht even higher. The Thai unit was trading at 34.20-21 to the greenback at midday Wednesday.