Features

A shake-up at Japanese corporations

Improved corporate governance, better relationships with shareholders and more companies paying dividends. Japanese corporations are finally getting their act together.

939_MW_P05_markets_main

"Things are getting testier at Japan Inc," says Jeffrey Goldfarb on Breakingviews. Trading house Itochu has been waging a hostile takeover war against sportswear maker Descente, and IT conglomerate Toshiba is grappling with a shareholder insurrection.

This highly unusual "domestic corporate aggression" highlights the progress Prime Minister Shinzo Abe has made with structural reforms designed to bolster productivity and growth.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

The reforms constitute the third of the three "arrows" his economic policy, "Abenomics", has been based on. The first is monetary policy, with the Bank of Japan massively expanding its money-printing programme in recent years; the second is fiscal stimulus.

The third has focused on corporate governance. There has been a push for more independent directors on company boards. Stock buybacks are on the rise, and relationships with shareholders are improving.The shake-up should help generate better shareholder returns and overall growth.

Advertisement
Advertisement - Article continues below

A key consequence of the third arrow has been a significant rise in the number of companies paying dividends. Previously, "companies tended to hoard cash", Tom Becket of investment management group Psigma told The Times. What strikes Becket, however, is that "nobody seems to be talking much" about Japan's corporate-governance revamp. The overlooked market thus offers good value.

One reflection of that is that the Topix index currently yields more than America's S&P 500: 2.3% compared with 1.95%.

A tight labour market

Having long opposed immigration, Japan is now granting foreign workers short-term visas for the tightest sectors. This labour-market tightness is gradually bolstering wage growth. That bodes well for consumption, which accounts for 60% of GDP. Spending by households and businesses helped ensure that GDP rebounded to an annualised rate of 1.4% last quarter, after shrinking in the third quarter.

The medium-term outlook, then, is auspicious, while a short-term boost for the stockmarket may also be on the cards. Japan's economy is highly exposed to China's, so progress on the trade front would be excellent news, as Jeffrey Halley, senior market analyst at Oanda, told Bloomberg. If "an acceptable deal gets over the line, we should see foreign buyers returning to Japan's equitiesin force".

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/517688/the-british-equity-market-is-shrinking
Stock markets

The British equity market is shrinking

British startups are abandoning public stockmarkets and turning to deep-pocketed Silicon Valley venture capitalists for their investment needs.
8 Nov 2019
Visit/511212/reasons-for-investors-to-be-bearish-but-stick-with-the-stockmarket-bulls
Stock markets

There are lots of reasons to be bearish – but you should stick with the bulls

There are plenty of reasons to be gloomy about the stockmarkets. But the trend remains up, says Dominic Frisby. And you don’t want to bet against the …
17 Jul 2019
Visit/510684/good-news-on-jobs-scares-stockmarkets
Economy

Good news on jobs scares US stockmarkets

June brought the best monthly US jobs growth of the year, but stockmarkets were not best pleased.
11 Jul 2019

Most Popular

Visit/investments/property/house-prices/600840/the-biggest-risk-facing-the-uk-housing-market-right-now
House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020
Visit/currencies/600842/eur-usd-euro-slide-against-us-dollar
Currencies

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
Visit/investments/stocks-and-shares/share-tips/600811/three-overlooked-stocks-to-buy-now
Share tips

Three overlooked stocks to buy now

Each week, a professional investor tells us where he’d put his money. This week: Joe Bauernfreund, portfolio manager at the AVI Global Trust, highligh…
17 Feb 2020
Visit/517625/tr-european-growth-trust-why-investors-shouldnt-overlook-europe
Sponsored

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019