Geographical Distribution of Firm Structure and Capital Investment: Cases of Major Japanese Exporters

A factor behind massive cash reserves held by companies is that they stably continue to receive cash flow over a long term while finding insufficient investment opportunities. Using information on the geographical distribution of production, sales and assets available in corporate financial statements, this study observed how Japan’s three major export-oriented manufacturing industries – automobiles, general machinery (machine tools, construction machines, industrial robots, etc.) and electrical machinery (comprehensive electrical machines, electronic devices, etc.) – shifted their geographical distribution of production, sales and assets among the world’s four major regions – Japan, North America, Europe and others including Asia – from FY1999 to FY2015. Observed results indicate the following four remarkable findings. First, the three industries reduced Japan’s share of their sales and assets continuously and substantially while increasing the share for the others including Asia continuously and substantially from FY1999 to FY2015. Second, nevertheless, as of the mid- 2010s Japan was still positioned as a production base for exports characterized by a large existing production capacity and massive sales to other regions. Third, the operating profit ratio for Japan was remarkably higher than for other regions in the observation period, excluding several years after the global financial crisis. Fourth, growth in plant and equipment investment in Japan was slower than in the other regions over a long term. Given these findings, a region-by-region breakdown of production, sales and assets at major Japanese export- oriented manufacturers indicates that a common feature of major Japanese exporters characterized by robust cash flow and fewer investment opportunities is especially true for head offices and corporate divisions located in Japan.