Balance Sheet Repair and Corporate Investment in Japan

22 Pages Posted: 27 Aug 2014

See all articles by Joong Shik Kang

Joong Shik Kang

International Monetary Fund (IMF)

Date Written: August 2014

Abstract

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. They also expanded abroad while the pace of corporate investment moderated. Regarding the latter, 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, implying that a successful implementation of structural reforms could have positive impact even in the near term by improving the medium-term demand outlook.

Keywords: Corporate sector, Japan, Balance sheets, Corporate investment, Econometric models, Investment, Capital, Growth, capital stock, financial crisis, global financial crisis, capital market, stock market, cost of capital, capital growth, stock market capitalization, real effective exchange rates, bond yields, capital ratio, recession, debt overhang, capital accumulation, securitization, asian crisis, capital structure

JEL Classification: E22, E61

Suggested Citation

Kang, Joong Shik, Balance Sheet Repair and Corporate Investment in Japan (August 2014). IMF Working Paper No. 14/141, Available at SSRN: https://ssrn.com/abstract=2487899

Joong Shik Kang (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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