Japanese companies

I showed in my previous blog that the ratio of depreciation to operating profits is much higher in the published figures for Japanese non-financial companies than it is for their US counterparts and that this could not be justified in terms of either the amount of equipment that needed to be depreciated or the rate at which it should be written off. There is therefore a strong implication that Japanese profits are understated relative to US ones, but this is subject to two provisos.

First, even if the ratio of depreciation to output should be the same in both countries, the ratio of operating profits could be very different if US companies had much higher ratios of profits to output than Japanese ones. Read more >>

The Japanese government is trying to encourage the country’s companies to increase the amount they invest. This is like trying to push water uphill. Japan as a whole and in terms of business already invests too much.

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