Balance Sheet Repair and Corporate Investment in Japan

Author/Editor: Joong Shik Kang
Publication Date: August 04, 2014
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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. 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.
Series: Working Paper No. 14/141
Subject(s): Corporate sector | Japan | Balance sheets | Corporate investment | Econometric models

Publication Date: August 04, 2014
ISBN/ISSN: 9781498323628/1018-5941 Format: Paper
Stock No: WPIEA2014141 Pages: 21
US$18.00 (Academic Rate:
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