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Japan companies cut investment at home even as cash on hand soars

Monday, March 9, 2015 - 17:31

[TOKYO] Japanese companies cut investment in the nine months through December, even as cash on hand soars and profits are forecast to hit a record.  Capital spending dropped 0.1 per cent in October-December, the third straight quarter of declines, data showed. In the same period, cash on hand at Japanese companies listed on the Nikkei 225 rose to almost 168 trillion yen (S$1.9 trillion). That was double the level at the end of March 2013, three months after Prime Minister Shinzo Abe took office.  At the same time, spending overseas has continued to be strong, with net foreign domestic investment down only 5 per cent last year from its 2013 peak, in data going back to 1996.

The investment decisions indicate corporate executives aren't buying into Abenomics.

"Japan isn't the place you want to invest, with its very low-potential growth," said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo. "Although some companies are shifting some production back home with the weak yen, I don't think this will be a dominant trend. Japan needs to fix its structural problems to attract businesses." Bank of Japan chief Haruhiko Kuroda called on Japan Inc. last December to deploy its cash and invest more on facilities and workers, saying "the rule book for business will be rewritten" as the economy emerges from deflation. Few companies appear to have taken heed. 

BLOOMBERG