Value push will mostly survive Japan election mess
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Una Galani
MUMBAI, Oct 29 (Reuters Breakingviews) -A decade-long effort to boost shareholder returns in Japan can probably continue to gain momentum. That's despite a drubbing at the polls on Sunday for the scandal-hit Liberal Democratic Party which cost Prime Minister Shigeru Ishiba's coalition its parliamentary majority.
The LDP - in charge of Japan for most of its post-war history - is synonymous with structural reforms that former Prime Minister Shinzo Abe kicked off in 2012. The goal was simple: improve national productivity after decades of deflation and slow growth.
Recent success stemming from that campaign has led the benchmark Nikkei 225 .N225 and Topix .TOPX indices to smash through levels of late last seen before the country's asset price bubble burst more than 30 years ago. The rally was supported by Japan's introduction of a stewardship code in 2014 and, more recently, fair M&A guidelines which warn companies to weigh up takeover proposals with shareholders in mind.
It helps a lot that Hiromi Yamaji, the boss of Japan Exchange 8697.T, has taken charge of that long official effort: The Tokyo Stock Exchange is wielding a stick, shaming individual companies that are not disclosing their plans to enhance shareholder value by excluding them from a list it publishes each month.
The upshot is clear: companies now hold fewer cross-shareholdings and have more independent directors on their boards. That is forcing companies into boardroom debates that can lead to better disclosure, and then to improved performance.
So while politicians bungle, Japanese company CEOs are likely to stay focused on growing high-return businesses, offloading underperforming ones, and shrinking the piles of cash on their balance sheets. Goldman Sachs notes buyback announcements this year are already 35% higher than the total for all of 2023. Shareholders are likely to remain pushy too: more than half of companies in the Nikkei 225 had one or more resolutions contested by at least 10% of voting investors at their annual general meeting in 2024, according to strategic shareholder services firm Georgeson.
Japan's next government, whoever leads it, may try to shore up its popularity by boosting fiscal spending and trying to delay raising interest rates. That would perhaps slow down the creation of a wealth management industry, but it would be unlikely to distract CEOs and shareholders too much. If there is any hesitation, the yen, which dropped to a three month low on Monday, will at least provide stocks with a short-term boost.
Follow @ugalani on X
CONTEXT NEWS
Japanese stocks rose on Oct. 28 as the yen fell to a three-month low after Prime Minister Shigeru Ishiba's coalition lost its parliamentary majority in the election held on Oct. 27. His Liberal Democratic Party (LDP), which has ruled Japan for almost all of its post-war history, and junior coalition partner Komeito took 215 seats in the lower house of parliament, short of the 233 needed for a majority. The LDP previously held 247 seats and Komeito held 32.
Graphic: More companies are disclosing shareholder value plans https://reut.rs/48uclVc
Editing by Antony Currie and Aditya Srivastav
Actifs liés
Dernières actualités
Avertissement : Les entités de XM Group proposent à notre plateforme de trading en ligne un service d'exécution uniquement, autorisant une personne à consulter et/ou à utiliser le contenu disponible sur ou via le site internet, qui n'a pas pour but de modifier ou d'élargir cette situation. De tels accès et utilisation sont toujours soumis aux : (i) Conditions générales ; (ii) Avertissements sur les risques et (iii) Avertissement complet. Un tel contenu n'est par conséquent fourni que pour information générale. En particulier, sachez que les contenus de notre plateforme de trading en ligne ne sont ni une sollicitation ni une offre de participation à toute transaction sur les marchés financiers. Le trading sur les marchés financiers implique un niveau significatif de risques pour votre capital.
Tout le matériel publié dans notre Centre de trading en ligne est destiné à des fins de formation / d'information uniquement et ne contient pas – et ne doit pas être considéré comme contenant – des conseils et recommandations en matière de finance, de fiscalité des investissements ou de trading, ou un enregistrement de nos prix de trading ou une offre, une sollicitation, une transaction à propos de tout instrument financier ou bien des promotions financières non sollicitées à votre égard.
Tout contenu tiers, de même que le contenu préparé par XM, tels que les opinions, actualités, études, analyses, prix, autres informations ou liens vers des sites tiers contenus sur ce site internet sont fournis "tels quels", comme commentaires généraux sur le marché et ne constituent pas des conseils en investissement. Dans la mesure où tout contenu est considéré comme de la recherche en investissement, vous devez noter et accepter que le contenu n'a pas été conçu ni préparé conformément aux exigences légales visant à promouvoir l'indépendance de la recherche en investissement et, en tant que tel, il serait considéré comme une communication marketing selon les lois et réglementations applicables. Veuillez vous assurer que vous avez lu et compris notre Avis sur la recherche en investissement non indépendante et notre avertissement sur les risques concernant les informations susdites, qui peuvent consultés ici.
