First, firms’ accumulation of capital stock slowed because they restrained business fixed investment during the period of protracted deflation. Therefore, we are now in a situation in which business fixed investment is likely to increase from a cyclical perspective.
The production capacity DI in the June Tankan survey indicates that the extent to which firms feel that they have excess capacity has steadily narrowed and that on an aggregate basis firms’ sense of having excess capacity has almost disappeared (Chart 8). As a result of past restraint in business fixed investment, capital stock has generally become older.