Finance Minister Taro Aso has criticised Japanese companies for sitting on too much cash, and said the government needed to take steps to encourage them to increase spending on wages and business investment.

Internal reserves, or retained earnings including cash, at Japanese firms have increased by 101 trillion yen over the past four years to some 400 trillion yen ($3.53 trillion), while many firms are wary of boosting business expenditures, Aso said.

“The situation went much too far, we must think of ways for that money to be spent on capital spending and wages,” he added.

The situation went much too far

However, Aso said it would be difficult to tax internal reserves, which has been proposed by Tokyo governor Yuriko Koike’s new Party of Hope, as that causes “double taxation” on companies that pay the corporate tax.

Japanese policymakers hope that a sustained economic recovery will boost wages and in turn household spending, though many analysts expect inflation to remain distant from the central bank’s two per cent target.

Aso, speaking to reporters after a cabinet meeting, also brushed aside some media reports that said the US had strongly demanded talks on a bilateral free trade agreement (FTA) during an economic dialogue this week.

Aso, who doubles as deputy prime minister, met Vice President Mike Pence for the dialogue in Washington, in which Japan and the US remained at odds over US demands for FTA talks.

“I don’t recall the US strongly demanded a bilateral FTA. There was just a mention once or twice,” Aso said.

“We’ve already told them that we are going to start TPP 11 (Trans-Pacific Partnership free trade talks) and that it would contribute to our national interests if the US join,” he added.

The US has withdrawn from the TPP earlier this year under President Trump’s ‘America First’ policy, raising concerns about a rising protectionism around the world.