Japan's stock market has shown signs of life, with a 20% increase this year, driven by big changes in corporate Japan [f878e924]. The government and stock market are focusing on corporate governance and pushing companies to improve their share prices and valuations [f878e924]. The authorities are increasing pressure on companies to disclose plans for corporate reform and are planning to publish a list of companies that are making efforts to improve performance and corporate governance [f878e924] [4a92ed37]. The Tokyo Stock Exchange plans to publish the names of companies that have not disclosed their capital plans, as part of its efforts to improve corporate governance [4a92ed37] [96a2b755]. The move comes after a series of high-profile scandals involving companies that failed to disclose their capital plans [4a92ed37] [96a2b755]. The exchange will also require companies to disclose their capital plans at least once a year [4a92ed37] [96a2b755]. The new rules will take effect in April 2024 [4a92ed37] [96a2b755]. The Tokyo Stock Exchange hopes that the increased transparency will help investors make more informed decisions and improve corporate governance in Japan [4a92ed37] [f878e924]. However, the success of these reforms remains uncertain, as Japan is not immune to global economic conditions [f878e924]. The authorities are trying to reorient the fundamental model of capitalism in Japan to benefit shareholders and everyday Japanese people [f878e924].
In other news, a recent employment lawsuit involving Citibank and a sandwich expense scandal highlights the pettiness of corporate disputes [f878e924].
The Tokyo Stock Exchange has announced that about 40% of companies on its prime section have met the bourse's voluntary request to come up with business plans to improve capital efficiency [96a2b755]. Companies such as Sony Group Corp. and Hitachi Ltd. are among those on the list [96a2b755]. However, corporate giants Toyota Motor Corp., Fast Retailing Co., SoftBank Group Corp., Nintendo Co., and Keyence Corp. failed to deliver [96a2b755]. The remaining 9.4% of companies are considering plans to improve capital efficiency [96a2b755]. The directive covers all companies except those listed in the Growth market [96a2b755]. The TSE's operator, Japan Exchange Group Inc., made the request last year to pressure firms that are reluctant to change [96a2b755].
Japan's slow efforts to extract value from its human resources by treating them as capital is said to be the reason for the large gap between Japan and the United States in terms of total market capitalization [101a504b]. The government has mandated that listed companies disclose information related to human capital and aims to spread the requirements [101a504b]. Hitachi will introduce a system in April to reflect how much the workers have promoted diversity in the organization in its performance evaluations and salaries [101a504b]. Nomura Holdings introduced a system last year to positively evaluate employees who contribute to creating a comfortable workplace [101a504b]. About 90% of companies have promoted diversity initiatives in the past year [101a504b]. Japanese companies have lagged in investment in human resources. The ratio of human resources to gross domestic product decreased to 0.1% in the five years from 2010, compared to an average of 0.41% in the five years from 1995 [101a504b]. The government has required companies to disclose information related to human capital as a disclosure element starting with annual securities reports for the fiscal year ending March 31, 2023 [101a504b].
Blackstone's president, Jonathan Gray, stated that the company is increasing investment in Japan due to a 'rebirth of dynamism' in the country's economy [544162d5]. Gray mentioned that businesses in Japan are being encouraged to prioritize return on equity (ROE), and the government is making efforts to promote retail investment [544162d5]. Blackstone plans to make investments in Japan valued at 1.5 trillion yen ($9.6 billion) over the next three years, which is on par with the assets the company has accumulated since it began operating in Japan in 2007 [544162d5].
Share buybacks have become more widespread globally, with companies in Japan, the UK, and Europe using them. This is unusual given the current economic circumstances, with limited IPOs, high interest rates, and moderate economic growth. Share buybacks allow companies to distribute windfall gains, neutralize share-based compensation, or release cash buildup. However, there are risks associated with buybacks, such as high valuations or funding with expensive debt. Recent buyback newcomers are typically market leaders in niche industries with strong balance sheets and growing dividends. They feel their share prices have been undervalued compared to American technology companies. Shareholders can benefit from buybacks by increasing their proportional ownership at cheap prices [20f8fa5a].
Masaki Taketsume, fund manager of Japan Trust at Schroders, discusses the outlook for the Japanese stock market. He believes that improvements in corporate governance in Japan have led to better profits for companies. He highlights the importance of finding companies that can set their own prices and mentions Chori as an example of a company improving its balance sheet. Taketsume cautions against high-growth stocks and explains Japan's practical approach to environmental, social, and governance (ESG) issues. He predicts that Japanese stocks will have a bright future due to inflation and improvements in corporate governance [cdcf0f2a].