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”.
Subscribe to 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.”
Sign up for MoneyWeek's newsletters
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.
-
Rightmove: UK asking prices hit record high but Britain enters buyer’s market
Higher property taxes are stifling the typically-busy spring selling season and buyers are benefiting from more choice, meaning sellers must price their homes more competitively
-
Inheritance tax reforms: government urged to rethink curbs on rural reliefs
MPs want the government to delay changes to inheritance rax reliefs for farmers
-
'Pension funds shouldn't be pushed into private equity sector'
Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throne
Greg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?
Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?
Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'
Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?
Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?