Cash Holdings of US, Japanese, and EU Companies Near $10 Trillion... Continuing to Rise Amid COVID-19

WSJ "Economic Uncertainty Rises, Steadily Increasing Over the Past Decade"

[Image source= Wall Street Journal]

[Asia Economy Reporter Park Byung-hee] It has been confirmed that the cash holdings of major global companies have continued to increase even after the COVID-19 pandemic.

According to The Wall Street Journal, the cash held by non-financial companies in the Eurozone, the United States, and Japan approached $10 trillion as of the end of last year. Eurozone companies held $4.09 trillion in cash. Japanese companies held $3.51 trillion, and U.S. companies held $2.11 trillion in cash.

At the end of the first quarter of last year, cash holdings were $3.62 trillion for Eurozone companies, $3.16 trillion for Japanese companies, and $1.86 trillion for U.S. companies. Despite COVID-19, corporate cash holdings have continued to increase.

At first glance, one might assume that since the economy contracted due to COVID-19, companies would have been affected and it would have been difficult to increase cash holdings.

However, the WSJ diagnosed that the increase in corporate cash holdings is not a peculiar situation caused by COVID-19. Companies have steadily increased their cash holdings over the past decade, and compared to ten years ago, corporate cash holdings have doubled.

The WSJ interpreted the accumulation of large amounts of cash as indicating a high level of economic uncertainty. It explained that the economic uncertainty, which increased after the 2008 global financial crisis, remains high and corporate cash holdings continue to grow.

Furthermore, although companies have increased dividends and share buybacks, they have not kept pace with the rate at which cash is accumulating. Rather, companies used the low interest rate environment during the pandemic to increase cash holdings as a precautionary measure.

In Japan, companies also increased cash holdings after the bubble economy collapsed in the 1990s. Currently, the cash held by Japanese companies is about 60% of Japan's gross domestic product (GDP). Eurozone and U.S. companies hold cash equivalent to 30% and 10% of their GDP, respectively. This is interpreted as meaning that Japanese companies feel relatively higher anxiety about economic uncertainty compared to U.S. and Eurozone companies.

This content was produced with the assistance of AI translation services.