Incase you heard that your economy is heading for a rocky patch with naysayers predicting a doomsday conspiracy, divert your mind, hold your breath and hear the good news coming from the Far East. Believe it or not, Japanese companies is said to be sitting on a record whopping 4.8 trillion USD of cash pile. This amount of cash is bigger than almost all the GDPs of most countries in the world.
According to a Bloomberg report, Japan Inc. have let a whopping $4.8 trillion, the biggest of its kind, to remain idle. While Shinzo Abe have been against cash-hoardings, this new phenomena is said to be because of companies earning more and becoming more profitable and the ‘scrooze-like-situation’ isn’t only because of overly cautious chief executives keeping the money as a buffer for hard times.
But since the coming of Shinzo Abe, the stock cash pile is said to have tripled. Although the Japanese Prime Minister is against cash hoardings, experts have said that Abenomics haven’t quite failed as the cash stock-up is from the earning and profits that Japan Inc is making.
However, critics have said that CEOs should either invest the surplus cash for more profits or return it to the shareholders. Japan is said to pay only 40 percent of the profits to its shareholders even if they can afford to pay it upto 70 percent.
Meanwhile, company experts have also pointed out that high cash stockpiles have shifted from being conservative to improved fundamentals as companies in Japan, in the past three years, have reached record high levels in purchasing buybacks which is financed through its own balance sheet rather than borrowing.
Furthermore, it is said that Japanese company executives doesn’t believe in debt financing but still believed that lots of cash give strategic flexibility for acquisitions or for bail out incase of unprecedented economic loss and crisis.