Author: Aki Matsumoto

The February stock market continued to be strong from the beginning of the month.
In February, the CG Top 20 underperformed both the TOPIX and JPX400 stock indices.

Supported by high overseas stock market prices in the U.S. and other countries, the Japanese stock market was also solid throughout the month, with the Nikkei 225 hitting its all-time high in 1989 on February 22. The stocks continued to be firm toward the end of the month.
The TOPIX and JPX400 indexes gained 4.83% and 4.75%, respectively, in February, while the CG Top20 stocks underperformed against both indexes, dipping -0.97%.

The composites of CG Top 20 stocks has been replaced as of July 1.
Wacom (6727), K’s Holdings (8282), Eisai (4523), NSD (9757), and Trend Micro (4704) were new additions, while Ebara Corporation (6361), Orix (8591), United Arrows (7606), Tokyo Gas (9531) and Hoosiers Holdings (3284) were removed. Details of the component stocks are shown in the table below.

Metrical provides monthly corporate governance assessments of approximately 1,800 companies, primarily prime market listed companies. This year, continuing on from last year, we would like to see how much progress has been made in corporate governance initiatives by listed companies over the past year.

We analyzed how much the 1,788 companies in the comparable Metrical universe improved in each evaluation category between December 31, 2022 and December 31, 2023. The table below shows the Metrical CG score, which is the overall corporate governance score, the average ROE and ROE over the past three years, the change in Tobin’s Q and foreign shareholding ratio in December 2022, December 2023, and change from 2022 to 2023, and the mean and median values.

The ratio of independent directors is on the rise, with the number of companies with a majority of independent directors (more than 50%) increasing to 280 out of the 1,781 companies in the Metrical Universe at the end of September 2023. I would like to examine the characteristics of companies with a majority of independent directors.

The chart below shows the number of companies in the Metrical universe with a majority of independent directors (more than 50% independent directors). Since there are less than 1,800 companies in the Metrical universe, the percentage of companies in the universe with a majority of independent directors (more than 50%) has just risen to 15.7% as of the end of September 2023, so it will take some time before a majority of companies have a majority of independent directors on their boards. It is likely to take some time before the majority of companies have a majority of independent directors on their boards. However, the number of such companies is gradually increasing.

In October, the stock market was in step with the U.S. stock market, which rose and fell in response to changes in U.S. long-term interest rates, and after a decline at the beginning of the month and a rebound in the middle of the month, the stock market was in a selling trend toward the end of the month.
The CG Top 20 index outperformed the TOPIX and JPX400 indexes for the second consecutive month in October.

The World Economic Forum (WEF) released its Gender Gap Report on June 21. I would like to discuss Japan’s ranking in the Gender Gap Index.

Japan’s ranking in the Gender Gap Index is as follows.
Among the G7 countries, Germany was the top-ranked country in 6th place, up four places from 10th the previous year. It was followed by the United Kingdom (15th), Canada (30th), France (40th), the United States (43rd), and Italy (79th). Japan was the only country that did not even make the top 100, falling nine places from 116th the previous year to its lowest ranking ever. The percentage of women in parliamentary and ministerial positions is low, and the country is in the lowest group in the political field, ranking 138th. Japan also ranked 123rd in the economic field, reflecting the labor participation rate and the gender gap in wages. In the education sector, the country also fell in rank to 47th place due to a lower enrollment rate of women in higher education.

The Gender Equality Bureau of the Cabinet Office, which promotes “women’s activities” rather than gender equality, usually posts a statement on the Gender Gap Index on its website, but although Japan’s ranking in the Gender Gap Index of 125th/146th countries (announced on June 21, 2023) is posted, the rankings for each field have not yet updated as of June 24.

Discussion Point 1: “Japan’s ranking in the Gender Gap Index is 125th/146th, a drop of nine places from 116th place last year and a record low.”
Since the Gender Gap Index rankings are relative, it is only natural that the country’s ranking would be lower than the speed at which the gender gap in other countries is improving. The main reason for this is that the ranking in the areas of “Politics” and “Economy” has not improved at all from its very low ranking position, compared to “Education” (99.7%) and “Access to Health Care” (97.3%), when looked at by sector.

Since the disclosure regarding retirement benefit trusts was made by NSK on April 20, I would like to share my thoughts on the issue of policy shareholdings and deemed shareholdings held in retirement benefit trusts.

On April 20, NSK issued a disclosure titled “Notice of Partial Return of Retirement Benefit Trust.” The contents of this disclosure were as follows: “The pension assets including the retirement benefit trust are significantly overfunded in relation to the retirement benefit obligation, and this situation is expected to continue in the future, so we sold part of the shares in the trust in the fiscal year ending March 31, 2023. The partial return of the retirement benefit trust is expected to result in an extraordinary gain of approximately 10 billion yen in the non-consolidated accounts (there will be no impact on the consolidated income statement for the fiscal year ending March 31, 2024).”