Japan once again targets corporate cash hoarding – a long-standing growth drag

Prime Minister Sanae Takaichi wants to dislodge a historic drag on Japan’s economy: cash hoarding by big companies.

Deflation led firms to expect wages and prices would stay low. Corporates prioritized deleveraging and liquidity, suppressing domestic investment. Cash accumulated. Japan’s potential growth has remained low; its companies have also historically generated the lowest return on equity among developed markets.

Takaichi’s June announcement targeted 17 strategic sectors, including AI, chips and digital infrastructure – seeking to dislodge that corporate cash to boost domestic investment and research. These policies build on previous corporate-governance and capital-efficiency initiatives by the Tokyo Stock Exchange.

So far, corporate capital expenditure is growing steadily (thanks to software investment), though it only surpassed its pre-GFC peak in yen terms last year.