PEC’s Japan strategy:Record pay-outs,Record M&A

Japanese cash-flows remain robust, pages 2-12. Company total payments toshareholders (dividends, buybacks) are at a record level, Fig 5. Total M&A YTDis on track to surpass 2015’s record high. We will be looking at M&A activity overthe coming weeks, beginning this week with In-In transactions.

In a slow-growth world with interest rates negative in real terms, a company’sseven (page 2) cash-flow choices collapse down to just two: M&A financed bycash/debt and total payments to shareholders. We believe these will be thedominant two choices for many more years.