Structural Changes In Japan: Corporate Governance

In this two-part blog, we put the spotlight on the structural changes in Japan that are coming to the fore and having a real impact. We highlight the need-to-know aspects of the instrumental political, regulatory and investor-led reform taking place and explain how these are carving out multiple opportunities for investors within this space.

Today, we outline the shift and improvements we have seen in Japanese corporate governance over recent years.

Japan is changing—for real this time 

For the last 20 years, there has been lots of talk about the supposed changes happening in Japan. But many investors have been badly bruised. Some stalwart critics have even gone as far as to claim that Japan will never change. However, we believe that the emerging developments coming out of Japan are positively affecting the fundamentals. In our view, the outlook for investors is optimistic–for real this time.

Japan’s corporate governance 101: Three key developments

Below we discuss the top three developments that we believe have been critical to securing corporate governance reform in Japan.

1. Abe's policies 

Japan's Prime Minister, Shinzo Abe, elected in 2012, has been on a mission to resolve his country’s macroeconomic problems. A three-pronged approach (pillars), his policies—more commonly known as Abenomics—aim to deliver:

1. Monetary policy
2. Fiscal policy
3. Structural reforms

His third pillar has homed in on tackling some of Japan’s long-standing concerns within corporate governance—a first in Japanese government history. His administration has actively encouraged the corporate sector to diversify management, increase spending/investment and to unwind their cross-shareholdings—i.e., Japanese companies holding shares in other Japanese companies—as a part of their business relationship.

2. Corporate Japan: Stewardship and governance codes

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Disclosures: These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page.

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