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Results of the Survey regarding Corporate Behavior since the Mid-1990s:Economic Activity, Prices, and Monetary Policy over the Past 25 Years from Firms' Perspective

June 28, 2024
Bank of Japan


As part of a "review of monetary policy from a broad perspective," the Bank of Japan carried out the Survey regarding Corporate Behavior since the Mid-1990s, covering around 2,500 nonfinancial corporations nationwide of varying industries and sizes. Through the survey, the Bank aimed to deepen its understanding of the features of corporate behavior since the mid-1990s and the impact this behavior has had on Japan's economic developments and the formation mechanism of wages and prices.

The findings of the survey suggest that factors that led to persistent sluggishness in Japan's business fixed investment, prices, and wages may be summarized into the following four points. First, having experienced prolonged economic adjustments in the wake of the bubble burst and ensuing financial crisis, followed by repeated substantial shocks (the Global Financial Crisis, etc.), firms reined in their active risk-taking, such as through fixed investment, and instead prioritized improving their financial soundness and accumulating cash and deposits for future contingencies. Second, in the wake of the bubble burst and ensuing financial crisis, many firms that faced severe price competition found it difficult to pass on higher costs to their prices as both consumers' preference for lower prices and their clients' cost-cutting stance intensified rapidly. Third, because firms had long been able to secure workforce even without having to raise wages, many of them came to curb wages in order to maintain low prices, creating a vicious cycle that led to entrenchment of consumers' preference for lower prices. Fourth, the declining and aging population, which has intensified over the past 25 years, also contributed to curbing business fixed investment and wage hikes through declining growth expectations and a heavier social security burden.

At present, many firms remain concerned about the adverse impact of the declining and aging population and about potential rises in fixed costs in the case of a rise in base pay. That said, many responded that they are no longer able to secure enough workforce if they curb wages. Moreover, given the success in the pass-through of the rise in import prices to selling prices, a growing number of firms are passing on higher personnel expenses as well.

Responses to questions regarding prices and business environment revealed that many firms, regardless of industry and firm size, consider that, in terms of their business activities, a state in which both prices and wages rise moderately is preferable to one in which they hardly change.

It was confirmed that the Bank's monetary easing over the past 25 years has supported the business activities and forward-looking investments of a wide range of firms by means of a decline in borrowing rates from financial institutions and improvement in availability of funding. In contrast, as perceived side effects of monetary easing, firms pointed to difficulties in securing workforce and intensified price competition, both brought about by sluggish corporate metabolism.


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Economic Research Division, Research and Statistics Department

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