Pushy investors prime Japan Inc for new phase

Olympus

25/05/2026 13:59

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Hudson Lockett

    HONG KONG, May 28 (Reuters Breakingviews) - In the summer of 1990, Texas oilman and corporate raider T. Boone Pickens stormed out of a five-hour shareholder meeting at Koito Manufacturing in Tokyo after his team was so thoroughly jeered by sōkaiya, or shareholder hecklers-for-hire, that it struggled to get a word in edgewise. Still fuming a year later over being denied a board seat at the Toyota supplier in which he’d built a 26% stake worth nearly $1 billion, the former wildcatter waved the white flag: “OK, Toyota; OK, Koito; I give up.”
It took more than three decades, but the script has flipped. Toyota insiders caved to demands from Paul Singer's Elliott Investment Management earlier this year by agreeing to raise their egregiously low buyout offer for Toyota Industries 6201.T, in the process setting a new milestone for aggressive investors in the country's $8 trillion equity market. Big funds now await the next major phase of cage-rattling, pushing management to go beyond the stewardship basics. More pressure on operations and corporate governance is poised to take center stage, but the holy grail of disassembling sprawling conglomerates will have to wait.
Japan Inc's fears of a breakup boom are understandable. There were a record 56 activist campaigns against Tokyo-listed companies last year, according to Barclays. The tally was more than all of Europe put together and second only to the United States. In the first quarter of 2026, overseas investors such as James Smith's Palliser Capital and ValueAct, co-led by Mason Morfit and Rob Hale, targeted businesses worth more than $110 billion combined. All the attention on such efforts, including from other big-in-Japan aggressors like Seth Fischer's Oasis Management, belies a subtler shift fostering the momentum: the mobilization of domestic asset managers affiliated with Nomura 8604.T, Daiwa Securities 8601.T, Sumitomo Mitsui Trust Group 8309.T and others that often account for at least a third of shareholder registers.
These developments follow decades of strenuous chiseling. Long after Pickens turned tail, homegrown raider Yoshiaki Murakami left a job in the government bureaucracy to start his own vocal fund. He scored some significant victories until an insider trading case stalled momentum. In 2007, the nation's top court thwarted a resurgent overseas contingency when it ruled against Steel Partners' attempt to buy Bull-Dog Sauce, validating the target's poison pill defense. Former Prime Minister Shinzo Abe subsequently ushered in a new era for Japan Inc, which led to revised corporate governance and takeover frameworks enabling landmark investor campaigns at Olympus 7733.T, Toshiba and beyond.
Proof positive of the progress surfaced at Canon 7751.T. The camera-to-copier maker’s octogenarian CEO Fujio Mitarai nearly got the boot in 2023 for refusing to seat a single woman on the board. His shockingly low 50.6% approval rate at the ballot signaled a major shakeup in a system where local investors consistently back management in almost any circumstance. Activists have seized on the opportunity to forge stronger relationships with more Japanese asset managers.
Combined with the Tokyo Stock Exchange's push for companies, especially the many that trade below book value, to boost returns, a mindset change has helped facilitate initiatives to monetize undervalued real estate holdings, including at Mitsui Fudosan 8801.T and Tokyo Tatemono 8804.T. Indeed, no industry looks safe from assertive investors scanning for landholding opportunities, evidenced by last year's pushback at Japan Post and Kansai Electric Power.
Such initiatives are broadening, too. For example, Elliott is also urging Kansai Electric Power's 9503.T management to charge large customers more. The strategy aligns with a fresh focus on the nuts and bolts of holding management accountable for their power structures and profit margins, since the message has now been sent, and widely received, on balance sheets and property deals.
Plenty of relatively easy value remains to be extracted in these arenas, but there's enough momentum to start mining other seams the way U.S. and European campaigns do. Case in point: Starboard Value's recent push for potato processor Lamb Weston LW.N to think bigger on cost savings. Japan Inc's poor performance compared to international peers is what motivated investors to seek improvements at $35 billion monosodium glutamate producer Ajinomoto and $50 billion Daikin Industries, which manufactures heating and air conditioning systems.
Although Japanese companies often lead in quality, they tend to misprice their products and abide bloated expenses. Entrenched hierarchies of seniority stifle creativity and prevent middle managers from moving up the ranks. Founders also have a habit of sticking around in informal roles, preserving cherished but costly departments or pet projects. Tackling such issues first should help increase shareholder value while keeping an empire mostly intact, giving CEOs more time to get comfortable with the idea of dismantling them.
The lingering red line against comprehensive restructuring, however, is reflected in the recent crusade at Mitsui OSK Lines 9104.T. Elliott urged the international shipping company to relist developer Daibiru, a subsidiary it subsumed in 2022. Doing so would allow the real estate division to raise equity at a more appropriate cost to its industry, rather than be subjected to the parent's more volatile cost of capital. The idea also contradicts the Tokyo bourse's preference for preventing companies from using such structures because they often neglect minority shareholders.
Not every such arrangement bilks outsiders, but the resistance to them is rational and underscores the difficulty in advancing a breakup agenda. Another major hurdle is that more than a few head-scratching expansions that activists probably would have opposed have worked out well for Japanese companies. Ajinomoto’s decision to make polymer film used in semiconductors is exactly what helped attract Palliser’s attention last month.
The most persuasive reason to narrow the scope of Japan's renowned conglomerates comes from $130 billion Hitachi 6501.T. Even though boss Toshiaki Tokunaga presides over a grab-bag ranging from power grids to ATMs to automotive chassis, ruthless streamlining has helped generate a total shareholder return of nearly 400% over the last five years, triple that of the benchmark Topix index.
For now, though, hammering away at corporate governance, efficiency and profitability will have to suffice. It's a long way from the stonewalling that T. Boone Pickens and other forerunners encountered, and bodes well for full-blown breakups becoming acceptable on a quicker timeline.
Follow Hudson Lockett on Bluesky and X.

Japan has become the world's second-hottest activist market https://www.reuters.com/graphics/BRV-BRV/zdvxgbjerpx/chart.png
Corporate governance is a growing focus in Japan https://www.reuters.com/graphics/BRV-BRV/zdvxgblylpx/chart.png
(Editing by Jeffrey Goldfarb; Production by Pranav Kiran)
((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))