Japan equity memo: Cash allocation

Research evidence excerpt

Japan equity memo: Cash allocation

Global Markets Research

Japan equity memo: Cash allocation 24 June 2026

EQUITY: JAPAN STRATEGY

Uses of cash and implications for share prices Research Analysts

and sectors Macro strategy Naoya Fuji - NSC

Allocation plans: Surprisingly high level of investment; increased investment negative for naoya.fuji@nomura.com

share prices, but positive for sectors with equipment shortages +81 3 6703 1245

Tomochika Kitaoka - NSC

Biggest allocations of cash at Japanese companies are for acquisition of fixed tomochika.kitaoka@nomura.com

assets and securities +81 3 6703 1815

Figure1 shows cash flow at TOPIX 500 constituents based on their cash flow statements.

In general, the main cash inflows are operating cash flow and the sale of fixed assets and

securities, while major outflows include the acquisition of fixed assets and securities,

interest & dividend payments, and share buybacks. The acquisition of fixed assets

includes capex, while the acquisition of securities includes M&A-related investment.

Changes in cash outflows: Growth in investments consistent with operating cash

flow, increased financial expenditure too

We identify two changes in cash outflows in recent years. (1) Increase in investment-

related outflows: Total fixed asset and securities purchases rose 38% between FY21 and

FY25, in line with operating cash flow growth of 44% over the same period. (2) Increase in

financial-related cash outflows: Combined interest & dividend payments and share

buybacks rose 110% between FY21 and FY25. Interest payments have been increasing

as a result of rising interest rates, and shareholder returns have been rising too, causing

the total payout ratio in Japan, which had been low by global standards, to approach the

global average.