Japan’s Foreign Assets and Liabilities

The composition of Japan’s current account balance has changed over time, with an increasing income balance primarily reflecting a growing net foreign asset position and higher corporate saving. A comparison of Japan’s income balance with peer countries highlights: (i) relatively high yields on FDI assets, and (ii) very low FDI liabilities in Japan. Panel estimation is used to derive separate exchange rate elasticities for income credit and debit, with novel accounting that disentangles the mechanical from the economic response to exchange rate fluctuations. Despite the changing composition of Japan’s current account balance, its response to exchange rate movements still operates mostly through the traditional trade channel, with a small but reinforcing contribution from the income balance.

Why the COVID-19 Pandemic Could Increase the Corporate Saving Trend in the Long Run

Given the global trend in corporate saving over the last decades, the COVID-19 crisis raises doubts about the persistence of companies’ saving behaviour due to the losses which have occurred in many companies caused by the isolation of households and by lockdowns. Before the pandemic, corporate net lending activities had been increasing for decades due to various factors ranging from the rise in uncertainty after the global financial crisis to the increased reliance on internal funding for research and development expenditures. In Germany, the rise in corporate saving was accompanied by an increase in equity capital and a reduction in the corporate sector’s reliance on bank loans. This article argues that the coronavirus crisis is most likely to interrupt the trend in corporate saving in the short run due to the decline in companies’ revenues. Nonetheless, similar to the pattern observed in the aftermath of the financial crisis, it seems reasonable to conjecture that the COVID-19 shock will strengthen corporate saving in the long run as companies may attempt to restore their liquidity and equity capital buffers to better prepare for future shocks. This will in turn create downward pressure on real interest rates and complicate the conduct of monetary policy.

External Financing Dependence and Corporate Saving in ASEAN5

Using firm-level data on ASEAN5, this paper studies the differential effects of macro-financial and structural factors on corporate saving behavior through the lens of external financing dependence. The finding suggests that non-financial corporations in ASEAN5 have been subject to binding financial constraints over the past two decades. Greater capital account openness or exchange rate depreciation reduces the average saving rate of industries with low dependence on external funds, while it increases the saving rate of industries with high dependence on external funds. The effects are greater for export-oriented industries. An improvement in banking sector competition, banks’ lending efficiency, or policy clarity is associated with lower saving rate of firms across the board.

Social democracy and the relative price of investment: left governments, indirect taxation and the division of corporate income in affluent democracies

While indirect taxes can fall on both consumption and investment spending, there has been little discussion on how governments may tax these two types of expenditure differentially. This article shows that the choice between taxing consumption and investment spending has important distributive implications for left governments as the traditional defenders of redistribution. In particular, when left governments increase taxes on investment relative to consumption expenditure, the higher price of investment relative to consumption goods drives up the labor share of corporate income, lowers corporate saving and reduces corporate net lending. Because this labor share strategy of redistribution is likely to antagonize capital, left governments tend to pursue it more intensely when corporatism has declined. I test these arguments using data across 12–14 Organisation for Economic Cooperation and Development (OECD) countries from the 1970s to 2010.