Value push will mostly survive Japan election mess
29/10/2024 11:00
(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.
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Graphic: More companies are disclosing shareholder value plans
https://reut.rs/48uclVc
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(Editing by Antony Currie and Aditya Srivastav)
((For previous columns by the author, Reuters customers can
click on GALANI/
una.galani@thomsonreuters.com))