TOKYO -- Corporate Japan appears to be hoarding much of its earnings rather than sharing the wealth with employees or investing in the future, Bank of Japan statistics released Wednesday show.
"With only a handful of companies raising wages, higher corporate profits have not reached households," explains Tsuyoshi Ueno of the NLI Research Institute.
The central bank's flow of fund reports follow how money travels between different sectors of the economy, such as corporations, households and the government.
Private-sector, nonfinancial companies saw a net inflow of funds of about 27.66 trillion yen ($250 billion) in fiscal 2017, a jump of 10 trillion yen from the year before and the highest level in seven years.
Meanwhile, the consumer sector saw a net inflow of less than half of that, at 13.43 trillion yen, about 2 trillion yen less than last year.
Nor is the flood of money into corporate coffers being routed into investment. "While earnings have climbed to record levels, capital investment has lacked momentum," Ueno said.
Consequently, cash and deposits held by companies rose to a record 261 trillion yen as of March 31, 2018. Retained earnings had mushroomed to 426 trillion yen at that time, according to the Finance Ministry.
Companies appear to be holding back due to the limited growth potential of a domestic economy beset by a shrinking population. Uncertainty over the global economy as the U.S. pushes its "America-first" agenda is only adding to the reluctance to spend.