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From Defensive Debt Repayments to Aggressive Investments
If we define “corporate excess cash” as the difference between the cash flows that corporations generate from their businesses and the amount of cash they use for making real investments in capital equipment in Japan––which we might also call a surplus of corporate savings over corporate investments––Japanese companies have shown an excess cash position since the end of the 1990s (Chart 1). In general, surplus funds are used by corporations either to increase their financial assets or reduce their financial liabilities. The main flow of corporate funds through the middle of the first decade of the 21st century went to paying down the excessive borrowings incurred during Japan’s bubble era. Thereafter, the flow shifted to making investments overseas.