Japan Shows Rising Frustration With Companies Sitting on Cash

(Bloomberg) — Japan is stepping up pressure on companies to use their near-record cash stockpiles to help drive growth, with Finance Minister Taro Aso saying Thursday the government should consider a tax to prod businesses into action.

“Japan should carefully consider issues like this,” Aso said in Parliament in response to a question from a lawmaker in his party about imposing an extra levy on retained earnings. “I share your concerns,” he said.

Companies are piling up savings by 2 trillion yen ($16.8 billion) a month, a pace that “isn’t normal,” Aso said. Prime Minister Shinzo Abe and central bank chief Haruhiko Kuroda have urged companies to plow more money into higher pay for workers and capital spending to back their effort to lift the economy out of two decades of stagnation.

Abe’s reflationary policies, spearheaded by unprecedented monetary easing by the Bank of Japan, have driven down the yen, leading to record profits for Toyota Motor Corp. and other big Japanese exporters. Companies that don’t use their profits for wages or investment are “scrooges,” Aso said in January, according to Kyodo News.

Even so, Aso said that the money companies build up has already been taxed, so the government would need to keep in mind that any extra levy would be double taxation.

Company investment dropped in the nine months through December, even as corporate cash and deposits were at a near record 231 trillion yen at the end of last year, according to BOJ data released this month.

The spending power of consumers has fallen as wage gains failed to keep up with inflation, with pay adjusted for price changes dropping in 19 straight months through January.

Workers affiliated with trade unions will get a 2.4 percent salary increase in the year starting next month, the biggest in 17 years, according to a preliminary estimate. This is less than the around 4 percent originally requested by the unions.

South Korea’s government started levying a tax on excess company cash from January to encourage them to increase wages and dividends.