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Business Trends

Corporate Japan's overseas retained earnings hit record high

Companies keep war chests full for foreign investment

Japanese companies are keeping more of their foreign earnings abroad to fund business expansion.

TOKYO -- Retained earnings at Japanese companies' overseas subsidiaries rose 15.4% to 4.42 trillion yen ($41.3 billion) last year, as a robust global economy spurs multinationals to invest more abroad.

The figure, taken from balance of payments data compiled by the Bank of Japan, marks the highest annual tally in comparable data going back to 1996.

The increase partly reflects an uptick in investment by Japanese companies to expand overseas production and sales networks. Seasonings maker Ajinomoto, for example, plans to open a factory in Myanmar by April, at a cost of around 2.4 billion yen. Japanese companies are also earning more overseas. 

Direct investment income at Japanese companies, which includes dividend and interest payments from foreign subsidiaries as well as retained earnings, rose to a record 8.79 trillion yen last year, as a weaker Japanese currency amplified dividends in yen terms.

The sum of retained earnings abroad rose to 50% of direct investment income last year from the mid-40% range in recent years. The figure averaged 27% in the three years through 2010 in the aftermath of the 2008 financial crisis.

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