Tokyo Stock Exchange launches shakeup to attract foreign investors
Japan's flagship Tokyo Stock Exchange launched its biggest shake up in decades to attract foreign investors. Alex Rankine explains why Japan's investment prospects are attractive right now.

This week the Tokyo Stock Exchange launched its biggest shake up since 1961 in a bid to attract foreign investors. The exchange has scrapped a “cumbersome system of four separate boards” for a more streamlined split into three new sections – “prime, standard and growth”, say Eri Sugiura and Leo Lewis in the Financial Times.
A key part of the plan is to make prime a more exclusive category than the unwieldy “first section” it replaces. That includes tougher requirements on market capitalisation and corporate governance (an area in which Japan has long lagged).
One-third of board seats are supposed to be held by outside directors. Such rules are meant to prod firms towards reform. But numerous loopholes have disappointed critics, with companies let into prime even if they fail to qualify so long as they show how they plan to do so “at some unspecified point in the future”. The reform looks to be a “squandered opportunity”.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Cheap yen, cheap stocks
But other developments could draw foreign investors to Japan. Core consumer inflation is still running at just 0.6% per year, so the Bank of Japan is sticking to its policy of ultra-loose money, unlike other central banks. That includes unlimited purchases of government bonds to keep borrowing costs low, meaning that overseas currencies offer higher rates. That’s prompting bond investors to sell the yen, which has slumped to a seven-year low against the dollar.
Loose policies and a weak yen should be a tailwind for stocks. “Taking comparative rates of inflation into account, the yen has halved in value against the dollar since 1995, taking it back to levels not seen since the early 1970s,” says Peter Tasker in Nikkei Asia.
That makes Japanese products and services look “extraordinarily cheap”. That will incentivise the onshoring of supply chains – a theme in vogue at the moment – as well as “the mother of all tourist booms” once global travel picks up. The “bargains” on offer in the “great Japanese discount store… will not be there forever”.
That said, long-term investors still need to see economic reforms, not a cheap currency. Tokyo has been “courting a weak yen” for at least two decades, says William Pesek, also in Nikkei Asia. That has delivered “record profits” for export-oriented businesses, but it has also depressed wages, acted as a drag on innovation and investment, and reduced “the urgency to restructure the economy”.
In 2013, then-prime minister Shinzo Abe promised bold changes to end Japan’s stagnation. But of the “three arrows” in his programme – easier money, fiscal reform and less red tape – only the monetary one “was fully deployed” and now even “that one is falling to earth” along with the yen. “If the secret of success was a weak currency, then Argentina and Venezuela would be booming.”
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Inflation holds steady at 3.8% ahead of BoE meeting
The rate of inflation did not rise in August, but the Bank of England is still expected to keep interest rates on hold tomorrow
-
Thousands of savers with £250k pensions take cash over tax-free money and IHT fears
With a record £70 billion withdrawn from pensions in the year to March, experts are concerned savers are making knee-jerk decisions without advice that could affect their long term wealth
-
Small UK industrial stocks are hidden gems
Opinion Ed Wielechowski of the Odyssean Investment Trust highlights three of his favourite British small-cap industrial stocks
-
Aurora Innovation is running on empty – is it overvalued?
Aurora Innovation, a maker of self-driving trucks, may have promised far more than it can deliver
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeek
Interview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?
The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?
Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in credit
Corporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
'The City's big bet on green finance fails to pay out'
Opinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Why is English football thriving – and can it last?
What has gone so right for English football? The national team has found its feet; the Premier League is swimming in money and profits are soaring