Balance Sheet Repair and Corporate Investment in Japan
IMF Working Papers, August 4, 2014
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- Balance Sheet Repair and Corporate Investment in Japan
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Bibliographic details
- Authors: Joong S Kang
- Published: August 4, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498323628.001
Summary
- We trace Japanese firms’ behavior over the last decades using aggregate corporate balance sheet data.
- Financial health of Japanese corporate sector has improved and firms paid back significant amount of debt and rebuilt their liquidity buffers.
- Firms expanded abroad while the pace of corporate investment moderated.
- Model estimates on aggregate corporate investment over the post bubble period show that expectation about future profitability, in particular medium-term demand outlook, has been the major driver.
- Implication: a successful implementation of structural reforms could have positive impact even in the near term by improving the medium-term demand outlook.
Key findings
- Financial health of the Japanese corporate sector has improved.
- Firms paid back significant amount of debt.
- Firms rebuilt their liquidity buffers.
- Firms expanded abroad.
- Pace of corporate investment moderated in the post-bubble period.
- Expectation about future profitability, especially medium-term demand outlook, is identified as the major driver of aggregate corporate investment in model estimates.
Policy implications and recommendations
- Structural reforms that improve the medium-term demand outlook could have positive near-term effects on corporate investment.
- Policies aimed at strengthening demand expectations may be more effective in stimulating corporate investment than measures focusing solely on balance sheet repair, given the prominent role of future profitability expectations.
Publication and metadata
- Author: Joong S Kang
- Date: August 4, 2014
- Pages: 21
- Volume: 2014
- Issue: 141
- Series: Working Paper No. 2014/141
- DOI: https://doi.org/10.5089/9781498323628.001
- Stock No: WPIEA2014141
- ISBN: 9781498323628
- ISSN: 1018-5941
Subjects and keywords
- Subjects: Asset and liability management, Asset valuation, Corporate investment, Corporate sector, Economic sectors, Financial statements, National accounts, Private investment, Public financial management (PFM)
- Keywords: Asset valuation, balance sheet, balance sheet development, balance sheet repair, Capital, cash holding, closing balance sheet account, Corporate investment, Corporate sector, cost of capital, Financial statements, GDP, Global, Growth, investment, investment behavior, Japan, nonresidential investment, Private investment, securities investment, WP
Balance Sheet Repair and Corporate Investment in Japan, IMF Working Paper No. 2014/141 (August 4, 2014).