FY2026 Report: Challenges of a Full-Scale Shift to a Growth-Oriented Economy | Chapter 7Corporate Balance Sheets and Capital Stock Accumulation

Corporate total assets expanded gradually after remaining broadly flat until the early 2000s, but the main driver was financial assets, and the share of tangible assets has declined since the 2000s. Capital investment increased from around the middle of the 2010s, but the decline in its share has not reversed.

If companies that excessively accumulate cash and deposits, with both borrowings and cash and deposits remaining at high levels, persist, funds may not be used for capital investment and other purposes, potentially weighing on capital stock accumulation and long-term economic growth.

Although financial conditions do not currently appear to be significantly restraining capital investment, uncertainty from rising interest rates, a prolonged situation in the Middle East, and shortages and surging prices of raw materials could dampen investment appetite.

In 2020, borrowings and cash and deposits increased amid cash-flow support, including zero-zero loans, and accommodative lending attitudes by financial institutions. Among small and medium-sized enterprises, the cumulative distribution of borrowings relative to total assets and sales had broadly returned to its FY2019 pattern by FY2023, while total outstanding borrowings remained above the past trend and accumulated cash and deposits also persisted.

The balance of cash and deposits differs in definition and estimation method depending on the statistics. The Flow of Funds Accounts use residual estimation, while the Financial Statements Statistics of Corporations by Industry use sample surveys of companies. In terms of tangible assets, delayed equipment renewal has lengthened the capital vintage, potentially impairing capital quality and productivity, making the promotion of capital investment suited to industrial characteristics an issue for consideration.