Research on Japan's Fund Circulation - Introduction to PRI Research and Exchange Activities

This report presents the outcomes of two research groups conducted by the Policy Research Institute (PRI) of the Ministry of Finance from 2023 to 2025: "Research Group on Structural Changes in Japan's Economy and Fund Circulation" and "Research Group on Japanese Corporate Growth and Domestic/International Fund Flows." The research clarifies the characteristics of fund circulation among households, corporations, overseas sectors, and government, with particular focus on "Japanese corporations as fund surplus entities." Since the bubble collapse in the early 1990s, Japan's fund circulation has undergone a structural transformation where the government shifted from fund surplus to deficit, while corporations shifted from deficit to surplus. This creates a balance between household/corporate fund surpluses and overseas/government fund deficits - a distinctive feature of the Japanese economy with no parallel in other countries. The research integrates analysis of household financial assets (reaching record highs), corporate retained earnings, Japan's net external assets, and government bond issuance from a fund circulation perspective. Through discussions involving university researchers and practitioners from mega-banks and regional banks, the study examines desirable fund circulation patterns for Japan's stable economic growth and explores optimal corporate activities and fund flows to link global economic growth with stable growth of Japanese corporations.