HIT BY a severe recession, Japanese companies are reducing spending on research and development (R&D) and many firms are scaling down low-priority or long-term projects in favour of those that offer immediate returns.

Japan's ministry of international trade and industry surveyed 28 big companies and found their total spending would be 1.9 per cent lower in financial 1993-94 than in the previous year.

However, the country's spending on R&D remains substantial and most of what is being trimmed is fat. Many Japanese companies are slashing capital spending, entertainment expenses, overtime pay and even regular employment in efforts to spare R&D from the budget axe.