Abstract
Japanese corporate sector has continued to depress wages, while the current profits increased for the sixth consecutive year, and the dividends to shareholders reached their record levels in the consolidated financial statements at the end of March of 2008. This paper investigates the increased dividends to shareholders and depressed wages in the recent Japanese economy, from the viewpoint of the aims and consequences of the deregulation of M&A (mergers and acquisitions) activities since the late 1990s. Section 1 shows an increase in current profits, remuneration for directors and stock repurchases, along with stagnating wages, for firms with capital more than 1 billion yen, following the economic recovery of 2002, using the Financial Statements Statistics of Corporations by the Ministry of Finance. Section 2 investigates the deregulation of business activities under the pressure of the Japanese business circles and the United States. The Japanese business circles demanded the government to deregulate laws to promote concentration in core competence, aiming at overcoming the protracted recession and surviving the global competition. The United States demanded the Japanese government to lift the control on M&A activities through the cross-border share swap, as a way of promoting US direct investment in Japan. In line with these demands, the following deregulations were realized: the ban on pure holding companies was lifted in 1997; the share swap system and the share transfer system were introduced in 1999; the corporate divestiture system was introduced in 2001; the corporate law was revised to permit the cross-border triangular mergers in May 2007. Section 3 investigates the increased dividends to shareholders and depressed wages against the background of increased M&A activities. The above deregulations promoted M&A activities since 1997, with a rapid increase in M&A among domestic firms and in M&A of Japanese firms by foreign firms. Now that the ban on M&A through share swaps had been lifted, firms were forced to keep their stock prices up, emphasizing the return on equity. To this end, firms increased dividends to shareholders and implemented stock repurchases, with the help of stock options, while keeping wages at the same or lower level. This section shows that those industries with a higher percentage owned by foreign investors tended to have higher growth rate of total dividends relative to the growth rate of wages per capita, between 2001 and 2006, using the data from the Tokyo Stock Exchange and the Ministry of Finance. In conclusion, the deregulation of M&A activities since the late 1990s diversified the procedures for corporate restructuring and dividend payment, and affected the distribution of ownership of firms, with corporate management increasingly dependent on stock prices, and with employee wages kept at the same or lower level.
