Japanese firms sitting on more than $3tn of cash are buying back their own shares at a record rate, while turning a deaf ear to calls from Prime Minister Shinzo Abe to step up spending on wages and investment to support the economy.
In February alone, taking advantage of low prices, Japanese companies from SoftBank to Nissan announced they would buy back a total of $9.3bn in shares, according to Thomson Reuters data - the highest since November 2010 and a monthly amount surpassed only five times in the last 30 years.
Japan’s largest companies are under pressure to boost meagre returns for their investors, but the volume of cash funnelled back raises doubts over the effectiveness of policies to revive growth with cheap cash, part of the government’s “Abenomics” stimulus programme.
Instead, companies are either sitting on cash - inventories and cash balances are at record levels – or returning it to their shareholders, unable to find investment prospects. Total shareholder returns, which include dividends as well as buybacks, are at record highs.
“This may be a rational behaviour for individual companies but if it becomes excessive, that could be a setback against Abenomics,” said Taro Saito, director of economic research at NLI Research Institute.
Since Abe came to power, promising to lift the economy out of the doldrums with an unprecedented monetary boost, Japanese companies have bought back or announced plans to buy back shares worth more than $79bn. That would have been enough to build 100 car factories or 30 semiconductor plants.
There is little sign of buybacks cooling substantially, as companies continue to take advantage of low share prices.
Overall capital expenditure, meanwhile, remains below pre-financial crisis levels.
Nippon Steel & Sumitomo Metal, Japan’s largest steelmaker, announced plans in February to buy back 100bn yen of shares - just over 4% of its outstanding stock.  The company has already set aside cash to overhaul facilities in Japan and sees the increase in treasury stock as a tool for the future. Base wage increases, it argues, would have raised fixed costs as steel prices languish.
“It is in preparation for our strategic actions in the future,” Nippon Steel executive vice president Katsuhiko Ota said last month. That could mean taking control of affiliates or reinforcing alliances, as it did with Suzuki Metal Industry last year, through a share exchange.
Another channel for cheap money to boost consumption and growth could have been wages, as large companies post record profits.  But government calls for wage rises to banish the deflationary mindset that has bedevilled Japan since the early 90s have gone mostly unheeded.
Price-adjusted wages fell 0.9% last year, the fourth straight decline, and a Reuters survey last month showed that 84% of big companies plan to raise pay less than 2% this year.
Fears of job cuts prompted workers at Toyota, which sets the tone for much of Japan Inc, to seek a monthly increase of just 3,000 yen (less than $27) - half of last year’s sum.
“Given slowing inflation, we can’t justify demanding higher pay this year,” said Masahiro Inoue, deputy secretary-general of the Japan Council of Metalworkers’ Unions (JCM) which represents about 2mn workers from leading industrial unions.
The unions have also swallowed the rise in buybacks without any hint of distaste.
“As long as share buybacks are reasonable and our pay demand is satisfied, I see no problems,” a unionist at a car manufacturer said on condition of anonymity.
And yet companies are awash with cash. Government data showed corporate internal reserves stood at ¥350tn ($3.11tn) in the fiscal year to March 2015, against ¥300tn two years earlier.  In comparison, capital spending was only ¥70tn, up ¥5tn in the past three years but still below the ¥76.8tn seen before the 2008 global financial crisis.  “The fundamental problem is a lack of investment opportunities. Many firms are struggling to find a place to invest due to waning growth prospects of Japan’s economy,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.