Inefficiency of Corporate Investment and Distortion of Savings Behavior in Japan
The value of corporate equity in Japan is dramatically smaller than that implied by the sum of the reproduction cost of accumulated investment and the market value of land owned by corporations (that is, the Tobin's average 'q' is much smaller than unity). This discrepancy appears to result from the very low rate of return earned on corporate investment and also from the extraordinarily small and stagnant dividend payments. It has persisted at least since l965, and its size has become progressively larger over time. If the value of corporate equity were sufficiently high to close the discrepancy, the net worth of the household sector would have been larger than its actual value by some 395 trillion yen in l998. Such an addition to household net worth would have generated additional consumption demand of at least 15 trillion yen. This paper traces the development of this valuation discrepancy over time, and explores its possible causes. In the process, we prepare an alternative estimate of the capital stock and its depreciation to those offered in the National Accounts. The basic difference is that the depreciation rates underlying our calculations are substantially lower than those used in the Japanese National Accounts, and closer to values prevailing in the United States. The qualitative characteristics of our results, however, remain unaffected by the choice between these alternative estimates.
|Date of creation:||Jan 2003|
|Date of revision:|
|Publication status:||published as Blomstrom, Magnus, Jennifer Corbett, Fumio Hayashi, and Anil Kashyap. Structural Impediments to Growth in Japan. Chicago, IL: University of Chicago Press, 2003.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
- Albert Ando & John Hancock & Gary Sawchuk, 1997. "Cost of Capital for the United States, Japan, and Canada: An Attempt at Measurement Based on Individual Company Records and Aggregate National Acccoun," NBER Working Papers 5884, National Bureau of Economic Research, Inc.
- Ando, Albert, 2002. "Missing Household Saving and Valuation of Corporations: Inquiry into Japanese National Accounts I," Journal of the Japanese and International Economies, Elsevier, vol. 16(2), pages 147-176, June.
- Dekle, Robert, 1994. "Market value estimates of Japanese saving and comparisons with the U.S.: can the capital gains to land be included in 'saving?'," Japan and the World Economy, Elsevier, vol. 6(1), pages 27-44.
- Ogawa, Kazuo & Kitasaka, Shin-ichi & Yamaoka, Hiroshi & Iwata, Yasuharu, 1996.
"An empirical re-evaluation of wealth effect in Japanese household behavior,"
Japan and the World Economy,
Elsevier, vol. 8(4), pages 423-442, December.
- Ogawa, K. & Kitasaka, S.I. & Yamaoka, H. & Iwata, Y., 1995. "An Empirical Re-Evaluation of Wealth Effect in Japanese Household Behavior," ISER Discussion Paper 0382, Institute of Social and Economic Research, Osaka University.
- Hoshi, Takeo & Kashyap, Anil K., 1990.
"Evidence on q and investment for Japanese firms,"
Journal of the Japanese and International Economies,
Elsevier, vol. 4(4), pages 371-400, December.
- Fumio Hayashi & Tohru Inoue, 1990.
"The Relation Between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms,"
NBER Working Papers
3326, National Bureau of Economic Research, Inc.
- Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-53, May.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9444. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.