Most firms have kept any increases in business fixed investment within the limits of their cash flow. Given that Japanese firms maintain this cautious stance, the pace of economic recovery is likely to remain moderate. At the same time, the fact that the pace of recovery is moderate increases the chances of a relatively long period of growth.
Looking at past economic fluctuations, corporate activity is seen to have amplified cyclical fluctuations in some instances. As economic activity picks up, the emergence of over-optimistic expectations about future growth tends to trigger an excessive level of business fixed investment and inventory investment.