TOKYO -- Japanese companies are shifting their asset holdings from real estate and machinery to dividend-paying investments, thanks largely to mergers, acquisitions and subsidiaries abroad -- a fundamental change in how companies make money

Dividends from overseas subsidiaries, in particular, are becoming increasingly important to corporate earnings. According to finance ministry data, stocks, bonds and other investment assets accounted for 47.8% of fixed assets at Japanese companies in the fiscal year ending in March 2017. That represents 10% growth from the previous year, to 438 trillion yen ($4.1 trillion).

Behind the surge is an increase in M&As. In the calendar year 2017, Japanese companies bought overseas businesses in 672 deals, according to Tokyo-based M&A advisory Recof.

Japanese companies usually create overseas subsidiaries to run plants they open overseas. The tangible assets belong to the subsidiary, but the parent company receives stock according to its share of the investment. The plants' earnings are paid out as dividends to the parent, lifting its profits.

Such dividends are becoming a major source of income as Japanese companies increasingly venture overseas.

In contrast, the proportion of Japanese companies' tangible assets, such as machinery and real estate, fell below 50% for the first time in the fiscal year ending in March 2017 to 455 trillion yen, or 49.6%, after hovering around 70% throughout the 1990s.

Tangible assets have been declining since peaking at 498 trillion yen in the fiscal year starting in April 1998. Companies saddled with nonperforming assets after the burst of the economic bubble in the early 1990s pulled back from further investments in facilities and real estate.

Overall fixed assets grew 4.8% to 918 trillion yen in the fiscal year through March 2017. These consist of tangible assets, investment-related assets, and intangible assets such as software and patents. The third category surged 22.6% in value, but still accounts for only 2.6% of fixed assets. 

The current economic recovery that began in late 2012 is encouraging companies to make capital investments. Still, much of this spending has been to replace outdated equipment, so assets values are unlikely to rise much, according to Toru Suehiro, economist at Mizuho Securities.

In a survey by the Development Bank of Japan, only 21.4% of manufacturers, a record low, said their capital investment for the current fiscal year is directed at lifting production capacity. In contrast, a record high of 28.1% cited maintenance and repairs.