Nippon Life Insurance, one of Japan’s largest institutional investors, said that less than a third of domestic companies that had complied with the Tokyo Stock Exchange’s request for disclosure of business improvement plans had also provided detailed strategies.
The TSE’s name-and-shame campaign, launched last year and aimed at goading Japanese companies into paying more attention to shareholders, is a pillar on which many strategists had based their bullish calls on the nation’s equities.
About 79% of Japanese companies listed on the exchange’s prime section, or the main board, had responded to the bourse’s request as of August, according to the TSE’s database.
But Nippon Life, which has invested in 795 prime market-listed firms that have disclosed such business improvement plans, said only 29% of the companies in that group had elaborated on their individual blueprints.
“The rest of companies were just talking with enthusiasm or didn’t have satisfactory disclosures,” said Tomochika Ishii, general manager of equity investment department at Nippon Life, which is popularly referred to as Nissay.
“There are companies that haven’t made much disclosures about how they plan to manage their balance sheets,” he told reporters when the insurer released its annual report outlining its stewardship activities.
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Despite the TSE’s campaign, return-on-equity of Topix firms has remained about 8%, staying below those of its peers, according to Bloomberg-compiled data.
Hopes that Japanese companies may manage their capital better have propelled Japanese stock prices to rise above their 1989 peak earlier this year. But since then the market has lost momentum amid worries about the Bank of Japan’s plan to tighten monetary policy and an economic slowdown in the US.
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Still, Nippon Life, Japan’s largest insurer with total assets of JPY83.5 trillion ($760 billion), credited the TSE’s program with helping raise awareness among Japanese companies about the need to allocate capital more efficiently.
“The TSE’s initiative has had a big impact in changing companies’ mindsets,” Ishii said. “The next step is to make it real and that’s where investors like us have a role to play.”
Chart: Bloomberg
