Japan Inc. sitting on Y506.4 trillion mountain of cash
Japan Times -- Sep 04
In banks across Japan sits a pile of money that’s bigger than most countries’ gross domestic product — the cash reserves of the nation’s companies. For some it’s a testament to their strength, but to many it’s a wasted opportunity.

Firms listed in Japan held ¥506.4 trillion in cash as of their latest filings, the highest level on record, according to data compiled by Bloomberg. It’s more than tripled since March 2013, months after Prime Minister Shinzo Abe returned to power vowing to stamp out cash-hoarding.

While companies see the money as a buffer against hard times, it has long riled investors, who say executives should invest it for growth or return it to shareholders. In one of his most lauded policies, Abe has overhauled corporate governance structures, seeking to make firms use capital more productively rather than letting it fester in bank accounts.

It’s not that the prime minister’s efforts haven’t borne fruit. Companies are providing larger returns to shareholders since Abe’s government instituted new rules for investors and executives starting in 2014. But Zuhair Khan, head of research at Jefferies Japan Ltd., estimates they’re only distributing about 40 percent of profits to stock owners when they could afford to pay out about 70 percent.

“This Scrooge-like situation needs to be fixed,” said Naoki Kamiyama, chief strategist at Nikko Asset Management Co. in Tokyo.

The traditional narrative of overly cautious chief executive officers clinging to unnecessarily large amounts of cash no longer tells the whole story, according to Felix Lam, a senior Asia Pacific equities portfolio manager at BNP Paribas SA in Hong Kong. Now, rising cash levels are more a function of increasing profits. Earnings per share at companies in the benchmark Topix index in the second quarter of this year were up 80 percent compared with the three months ended December 2012, data compiled by Bloomberg show.

News source: Japan Times
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