Abstract: Japan’s high corporate savings might be holding back growth. We focus on the causes andconsequences of the current corporate behavior and suggest options for reform. In particular,Japan’s weak corporate governance—as measured by available indexes—might becontributing to high cash holdings. Our empirical analysis on a panel of Japanese firms
confirms that improving corporate governance would help unlock corporate savings. Themain policy implication of our analysis is that comprehensive corporate governance reformshould be a key component of Japan’s growth strategy.