Corporate Japan borrows again as deals pressure ratings

Japanese companies are abandoning their decades-long deleveraging mindset to fund aggressive M&A and higher shareholder returns, spooking credit rating agencies. The shift marks a reversal from the post-1990s balance sheet recession when corporates became net savers despite ultra-low rates. S&P Global Ratings warns that the "thirst for acquisitions" risks creditworthiness as companies stretch to chase overseas growth and boost ROE under shareholder pressure. Overseas M&A is accelerating, often funded with new debt rather than the massive cash piles Japanese firms traditionally hoarded. The timing is awkward: just as Japan exits its post-deflation era and the Bank of Japan begins normalizing policy, corporate borrowing is picking up for deals and buybacks rather than productivity-enhancing investment. Rating agencies are already flagging potential downgrades for companies whose leverage metrics deteriorate.