“These codes focus on making Japanese corporations more transparent and more responsive to shareholders,” Kamiyama continued. “With the advent of the Stewardship Code and Corporate Governance Code, we expect more focus on ratio-related management measures, which should lead to a significant improvement in ROE levels over the medium term.”
Kamiyama also said he expects a ‘marked increase in share buybacks and dividend payouts’, something that could be music to the ears of shareholders.
“One of the main purposes of the reforms has been to encourage ‘cash-rich’ Japanese firms to stop hoarding cash and funnel some of it back into the economy,” he said. “While this tendency to hold cash means that the quality of assets on Japanese balance sheets is usually fairly high, it has led to weak growth for both companies and the economy as a whole.”
“However, clearly, some of these cash-rich companies are changing their attitudes towards shareholders. Kamiyama added. “As evidence of this growing shift in corporate behaviour and as a result of the increasing pressure on corporate governance from the government and institutional investors to improve ROE, the past few years have seen a marked increase in share buybacks and dividend payouts.
“In Japan fiscal year 2015, both dividends and buybacks rose to a record level, with Japanese companies paying out almost JPY10trn (£74.6bn, $97.6bn, €87.5bn) in dividends and large firms announcing significant buyback programmes.”
So, as with all investments patience will still be required with Japanese equities, but perhaps a little less than before.
