Moody's says there is little hope of a quick turnaround
That could trigger a reverse in the slight rise in investment by companies, pushing the country deeper into recession.
Whether or not the recession - widely regarded as already well advanced - is official or not will be revealed on Friday, when economic growth figures are released.
Most observers expect a contraction, making two straight quarters of negative growth.
Splashing out
Capital spending, according to the Ministry of Finance, crept up 0.5% in the three months under consideration, although manufacturing investment actually shrank 2.7%, the first year-on-year fall since March last year.
But beside indications that capital spending is expanding, if only just, there was little good news in the Ministry of Finance's quarterly corporate survey.
The survey, one of the more keenly watched measures of Japan's economic health, said profits fell 32.5% in the July-September quarter compared with last year.
Manufacturing was hit even harder, with profits down 53.4%.
Sales also slipped, for the first time in two years.
And sentiment - the measure of how big business believes the current quarter will be - slumped to minus 28.5 from minus 18.3 in the previous three-month period.
Grim outlook
The arrival of yet more indicators of the degree to which corporate Japan is ailing after ten years of economic stagnation will fuel concerns about what Japan's leaders are doing to tackle the country's problems.
The figures come less than a day after the Organisation for Economic Cooperation and Development, made up of the leading industrial countries, painted a gloomy picture of Japan's economic prospects.
It said Japan's slowdown was even worse than most people had expected, and accused the government of failing to address the country's deep-seated structural problems.
The snail-like approach to tackling the bad debts weighing on banks' balance sheets are key to the problems, the OECD said. The huge amounts of non-performing loans are combining with overcapacity to hit investment and damage profitability.