Japanʼs intangible capital and valuation of corporations in a neoclassical framework

This paper estimates the economic value in the 1980s and 1990s of corporate assets in Japan, including both tangible and intangible assets, based on the neoclassical framework of McGrattan and Prescott (2005). Our estimates use a new micro-data set that comprises the accounting statements of all listed, non-financial companies in Japan. We find that in 1980–1986, a period that immediately preceded Japanʼs so-called “bubble economy”, our assessed value of corporate productive assets, net of the value of corporate debt, is approximately equal to the actual stock market value of Japanese corporate equity. The finding differs from previous results based on studies of aggregate data sets or based on studies of micro-data sets that neglected intangible capital. We also show that the Japanese ratio of the amount of intangible capital stock to the amount of tangible capital stock is comparable to the analogous ratios for the U.S. and U.K.

► We provide a new interpretation of Japanese stock market developments since 1980.
► We use a new micro-data set and take into account the role of intangible capital.
► Intangible capital estimates in Japan are comparable to the U.S. and U.K. cases.
► With the value of intangible capital, Tobinʼs q for 1980–1986 is close to one.
► Stock price surge in the late 1980s, however, remains for us an unsolved puzzle.