Tokyo’s stock exchange will release Monday its first monthly list of listed companies that have disclosed plans to optimize its capital management and share price that will help enhance investor returns.
This is just a part of Prime Minister Fumio Kishida’s plans to transform Japan Inc into an attractive investment proposition for foreigners and locals to create jobs and generate returns for retirement savings.
Corporate governance reforms include mandating greater diversity and independence in Japan’s companies.
Japan is stepping up efforts to ensure its listed companies become more efficient with capital allocation and increase shareholder returns this year.
The operator of Tokyo’s stock exchange will release Monday, its first monthly list of public companies that have shared their plans for optimizing capital management to enhance returns for their investors.
The Japanese government and the TSE also have plans in the works for increasing corporate board independence and female representation. Japan government is also pushing for better corporate governance right now.
The Tokyo Stock Exchange is entering into its second year of corporate governance reforms, kickstarted in March last year, by directing listed companies whose shares are trading below a price-to-book ratio of one — an indication it may not be using its capital efficiently — to “comply or explain.”
That’s just one part of Prime Minister Fumio Kishida’s broader pledge to transform Japan Inc into an attractive investment proposition for foreigners and Japanese investors.
In a bold move aimed at encouraging its citizens to redirect their savings towards investment, Japan overhauled its Nippon Individual Savings Account (NISA) to make all investments under this program tax exempt for the lifetime of the investor effective this month.
As lots of investments are coming into Tokyo, according to Japan Exchange, the onus also falls on the government to ensure steady and reliable returns from Japan’s companies.
These measures also have implications for Japan’s broader economic agenda such as firms’ wage-setting behavior and the effort to reflate the world’s third-largest economy, which has been mired in deflation for much of the last three decades.
With a rapidly ageing population, the country is also keen on its listed companies offering attractive shareholder returns to ensure its people have more to live on than just their regular pensions in their retirement.
“It’s a very critical issue in the future for Japan. Many people do not have enough income to live after retirement,” Yoshikawa said. “The government also wants to attract more foreign investment to create more higher skilled jobs.”
The prospect of meaningful change has revived interest in the Japanese stocks in the past year, with the benchmark Nikkei 225 index soaring to its highest in more than three decades — with many foreign investors taking the lead of legendary investor Warren Buffet and his bullish calls on Japanese equities.
At its last update in October, the Tokyo Stock Exchange said only 31% of 1,235 “prime” listings — the most liquid stocks with the largest market capitalization — and a mere 14% of 887 “standard” listings have responded to its request for reporting their discussions on, and specific measures and timelines for improving the way they manage their capital.
There are other moves aimed at helping Japan Inc inject more diversity and independence to their boards, while getting Japanese companies to become more responsive to shareholders.
As part of the rules Japan’s government plans to include in listing regulations, the largest listed firms are required to have at least one woman on their respective boards by 2025.
By 2030, Japan aims to have women constitute at least 30% of the directors at major companies, according to draft plans released by Japan’s Gender Equality Bureau in June that are broadly aimed at increasing and empowering female participation in the economy.