Are increasing share buybacks proving the power of Abenomics?

Aims to stop firms hoarding cash is working

While it is true not all of Prime Minister Shinzo Abe's reforms are developing as swiftly as market participants might hope, there is significant and undeniable progress in areas of corporate governance reform, with a positive impact on companies' return on equity (RoE).

Although the 'easy gains' of the early days of Abenomics are a thing of the past, and Japan is currently battling the headwind of a stronger yen, certain companies are becoming increasingly profitable in light of these reforms. One of the main purposes of the reforms has been to encourage 'cash-rich' Japanese firms to stop hoarding cash and funnel some of it back into the economy. While this tendency to hold cash means the quality of assets on Japanese balance sheets is usually fairly high, it has led to weak growth for both companies and the economy as a whole. However, clearly, s...