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Huge cash reserves held by Japanese companies remain untapped by Australian businesses, according to a PwC report released today.
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Japanese cash 'untapped': PwC
07 April 2014
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Speaking in Tokyo, PwC Australia Partner Jason Hayes said Japan’s depreciating yen is hindering Australia and other economies from tapping into the huge reserves.
“Recent figures put the size of Japanese companies’ cash reserves at a near record 150 trillion yen ($1.5 trillion). That’s about 25 per cent of Japan’s annual GDP, or 100 per cent of Australia’s annual output,” Mr Hayes said.
“But despite being so flush with cash, merger and acquisition activity among Japanese companies has been muted since the onset of 'Abenomics', with analysts blaming the rapid, and at times volatile, depreciation of the yen.
“The Abe government hopes that by slaying the deflation dragon - or at least driving it back into its cave - it can convince both consumers and corporates to begin spending and revive soggy domestic demand,” he said.
The PwC report highlights a number of key points regarding Japan’s involvement in the Australian economy, including that:
- Japan remains the largest Asian investor in Australia and the third largest overall behind the US and UK.
- Japanese foreign direct investment in Australia totals $61 billion and is skewed towards energy and resources.
- The top 10 deals into Australia continue to be dominated by the metals and mining sectors.
- Less than 1 per cent of Japanese small and medium-sized businesses have subsidiaries or offices overseas.
- Japan continues to hold the second largest pool of financial assets.
- Leading Japanese firms are looking overseas, with domestic M&A accounting for just 18 per cent in Q3.
- Japanese outbound M&A declined by 46 per cent in 2013.
PwC released the report while Prime Minister Tony Abbott was in Japan leading an Australia trade mission.
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The prime minister announced Japan's involvement in Australia's ‘New Colombo Plan’.
“This important policy will foster closer ties between Australia and our region and develop stronger people-to-people and institutional links,” Mr Abbott said.
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