May 10, 2014 2:41 am JST

It's time for Japan to wean itself off BOJ stimulus

MAKOTO KAJIWARA, Nikkei senior staff writer

TOKYO -- With the stock market down more than 10% from the end of 2013, both Japan's corporate sector and government have begun heeding calls from investors unhappy about massive cash left in company coffers and the lack of a long-term economic policy.

     Unable to shake off their financial-crisis mentality, Japanese companies have taken flak for hoarding more than 200 trillion yen ($1.94 trillion) in cash that does not generate profit. With the stock market taking a hit, however, corporate chiefs have begun to put the money to use.

     On Friday, shares of sewing machine maker Brother Industries and Canon rose 8% and 2% respectively, following stock buyback announcements the day before. Arisawa Mfg., which processes glass fibers and insulating resins, jumped 12% after announcing a dividend increase Thursday.

     And in a big nod from the market, Toyota Motor's stock rose 1% Friday despite the announcement the day before that the automaker's fiscal 2014 profit will remain flat on the year due to increased spending on R&D and production facilities. The market gave high marks to its decision to pursue a long-term strategy instead of immediate results.

     For Prime Minister Shinzo Abe, who was able to maintain public support on the back of high-flying stock prices, the recent market slump is a concern. On Wednesday, the index sustained a year-on-year decline for the first time since the end of 2012, when the Abenomics-driven rally began.

     On May 1, Abe, on a visit to London's financial district with prefectural governors and municipal chiefs, called on foreign firms to invest in Japan.

     His call was in line with prominent American investor Wilbur Ross' mantra --  in the long run, what's important for Japan is direct investment from abroad that will create employment, rather then short-term investment from hedge funds.

     What is disheartening, though, is that market players seem to be still counting on the Bank of Japan to lift up the market. A QUICK survey conducted by May 1 shows that 26% of respondents cited additional easing as a condition for stock prices to rise. Corporate tax cuts were also named by 26%.

     Monetary easing was intended to warm up deeply chilled economic sentiment. Now that the economy is mending, the market should be pressuring companies and government to take action, rather than expecting more from the central bank.