Capital Financing Strategies of the Japanese Semiconductor Industry

It is commonly argued that some Japanese firms enjoy lower capital costs than their U.S. counterparts because of their ability to employ a high degree of debt leveraging. However, since March 1977, several of Japan's major semiconductor manufacturers have made large reductions in their debt-to-equity ratios. This article examines the motivations behind this change, places it in the context of the Japanese financial system, and explores its implications for the relative costs of capital in the United States and Japan.