Japan Firms' Cash Holdings Hit Record High

        TOKYO--Japanese companies added to their mountains of stashed cash in the third quarter, pushing up their combined savings to a new record equivalent to almost half the nation's gross domestic product despite repeated calls by Prime Minister Shinzo Abe to put the money to more productive use.
        The currency holdings and deposits of private-sector companies at the end of September, excluding financial firms, increased 4.2% from a year earlier to Y233 trillion ($1.96 trillion), the Bank of Japan said Thursday. The holdings serve as a reminder of Japan Inc.'s continued sense of caution over the future direction of the economy, global growth and the possibility of economic shocks.
        Since Mr. Abe came to power two years ago with a pledge to bring Japan's economy back to prosperity, company's cash holdings have grown by roughly 12%.
        While rising earnings are likely a major factor behind the increased cash positions, the data overall suggest that the "conversion of the deflationary mind-set of corporate Japan isn't complete yet," said Toshihiro Nagahama, chief economist at Dai-ichi Life Insurance Research Institute.
        Mr. Abe has been pushing companies to stop hoarding cash and use the gains they've made from market movements brought on by his Abenomics pro-growth measures such as the weaker yen that have sharply raised exporters' earnings.
        Faster wage increases are seen as particularly crucial for Mr. Abe's mission to defeat deflation and achieve a combination of 2% inflation and robust growth. His push for wage increases has taken on extra urgency since the decision by his own administration to raise a national sales tax in April has cut real wages and weakened consumer spending, tipping the economy into a recession.
        Mr. Abe is expected to pile more pressure on companies ahead of Japan's labor-management wage negotiations in the spring, encouraged by his decisive election victory over the weekend.
        But corporate executives, for their part, have been frustrated by slow progress in the prime minister's promised structural overhauls to boost Japan's growth potential. Many company leaders consider deregulation and other reforms to be more important than market movements for their long-term business prospects.
        The latest BOJ figures also show that the total value of financial assets held by Japanese households' was up 2.7% to a record Y1.654 quadrillion--about Y100 trillion higher than where it stood when Mr. Abe took office. A weaker domestic currency boosted the value of overseas investments in yen terms, the BOJ said.
        The BOJ's holdings of Japanese government bonds rose to a record Y233 trillion, or 23% of the value of total outstanding debt. The central bank has been a key player in the Abenomics push to combat deflation by buying massive amounts of JGBs to flood the economy with cash in the hope it will generate 2% inflation.
        Write to Takashi Nakamichi at takashi.nakamichi@wsj.com
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        (END) Dow Jones Newswires

        December 17, 2014 23:10 ET (04:10 GMT)

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