Solving Gender Gap in Higher Education Is Key, as Political Leadership Can’t Be Count On

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.

What Should the Legal Department Know about ESG?

A conversation between several lawyers at Tanabe & Partners (T&P) on the topic —


In this discussion, I would like to look at ESG international voluntary disclosure standards that legal departments should be aware of. Since hundreds of standards are gradually converging, why don’t we focus on two standards, GRI and ISSB. First, should legal departments keep up with ESG disclosure standards? Some people seem to think that the corporate department, committee or task force charged with sustainability should know about such standards, and that the legal department should leave things up to them. What do you think about this?


ESG has become an integral part of corporate strategy and risk management. The legal department is expected to fulfill its role in both promoting strategy and improving risk management, so it cannot afford to be ignorant of the basics of ESG disclosure standards. International disclosure standards are gradually being woven into regulatory disclosure. For starters, Japanese companies are required to include a statement of “sustainability-related views and initiatives” in their Yuho.

When you are asked to review a contract from a legal perspective, what do you rely on? You can only review the contract, if you know the Civil Code, the Companies Act, etc. Legal is asked to review because Legal is able to foresee what will happen if the contract is breached, what will happen if the law is violated, etc. It is difficult to conduct an effective review of ESG disclosure without knowing the system and the concept of ESG disclosure standards.

METRICAL: Share Buybacks Are Likely Due to Reduction of Shares in Retirement Benefit Trusts and Policy Holdings

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).”

AGM Season in Japan: Time to Encourage Director Training!

Unfortunately, every June at AGMs in Japan most investors approve the vast majority of director candidates –even first-time director candidates — without confirming whether they have ever received any form of director training to prepare them, or a “refresher” course on emerging issues and new best practices. Because of this, an increasingly large percent of directors in Japan have served less than three years (at least 30% in the case of outside directors!) in their very first director position, but have never even received basic training.  METI and the FSA are starting to consider this as a major problem.

Serving as a director on a public company board is not the same job as serving as a lawyer, academic, or the head of global sales.  It requires different knowledge, mindset and preparation.  Raising PBRs, improving sustainability, DEI, and optimizing the business portfolio are not going to “happen” by themselves just because those topics appear in pronouncements and the press.  They will only take root and consistently improve if the quality of Japanese boards increases.  But right now, the average quality of boards is quite low, as can be seen from these…

Taro Kono, Could You Please Speak to the FSA and TSE?

The FSA and TSE have been assiduous in encouraging more engagement between investors and Japanese companies, and in highlighting the problems raised by the ever-increasing share of funds invested on a passive basis in the Japanese market – which is leading to a sort of “hollowing out” of meaningful feedback from institutional investors.  I would encourage anyone who reads Japanese to read the most recent Action Plan for corporate governance, especially including the reports by the Secretariat in the FSA’s May 16th meeting.  This is very commendable.

On the other hand, there is a stark contradiction between this stance and a big defect in the machine-readability of the Corporate Governance Reports (CG Reports)  submitted by Japanese companies to the JPX/TSE, which is regulated by the FSA . The defect renders a major portion of these reports almost entirely useless for rigorous analysis by computers… even though I pointed  it out some six years ago. In a word, the 11 (or more) different “disclosure items” required to included in CG Reports, which account for close to half of the meaningful information in each report, are all mashed together into one XBRL “barrel” that does not even have a standardized format.

Webinar: “Using High-Dimensional Corporate Governance Variables to Predict Firm Performance in Japan”

On June 13th, join us for a discussion showing the future of corporate governance analysis.  In this webinar we will introduce the results of leading-edge academic research to determine whether corporate governance practices and firm characteristics can be used to predict firm performance over the short-, mid-, and long-term. Earlier attempts at this research have always come with limitations or been focused narrowly on certain practices, but using BDTI’s detailed database focusing on Japanese corporate governance practices and important characteristics of all listed firms in Japan, researchers have been able to conclude that certain corporate governance practices and facts should be of interest to every investor.

METRICAL : CG Stock Performance (Japan) for April 2023

The solid U.S. stock market, which has settled down from last month’s financial system unrest, led Japanese stocks to move higher toward the end of the month.
The CG Top20 stock price index significantly outperformed both TOPIX and JPX400 for the second consecutive month.

The stock market rallied toward the end of the month on the strength of U.S. stock prices as U.S. stocks gradually calmed down from the financial system unrest triggered by the failure of the Silicon Valley Bank in the U.S. On the last day of the month, the Bank of Japan’s monetary policy meeting maintained monetary easing, and stock prices rose sharply.

Outside Director Lessons #4: What is Worse Than the Company Going Under?

Here is an example of the sort of thing that can happen at mid-size companies in Japan. Let’s say that at the time when you join the company as an outside director, the son of the founder is the CEO.  The son is an engineer by training, but when his father became too old to lead the company, the son took his place. The son is the nicest, most gentle man in the world, but he does not have enough management experience or the character to serve as a decisive leader at a time of disruptive technological change.  It is clear to you that that he will have to step down, and the board will have to find someone from the outside who has more managerial experience and decisiveness.

At that point, your self-appointed job becomes “finding a soft, smooth way to persuade the CEO to step down”. 

Outside Director Lessons #3: How Suddenly Companies Can Collapse!

As its sales increased, Alps had financed its growing working capital needs by borrowing from banks.  But no bank wanted to be a “main bank” for a small unlisted company any more. So every year or so we added another bank lending us 200 million yen or more, until we had something like six or seven different banks. All of these loans were short-term, and had to be “rolled over” each year.

As long as all the banks rolled over their loans each year, and we were able to find a new bank when we needed it, to the board, everything seemed fine.

Outside Director Lessons #2: My First Experience as an Outside Director

Why do I think director training is so important to Japan’s future? Because I have seen so much of what goes wrong behind the scenes, and the losses and pain that are caused, when boards do not function well here. I have a lot of “scar tissue”, as we say in English.  What is really interesting, is how many commonalities there are in the causes for inadequate governance.  The size of the company, and its industry, really do not seem to matter. It is the reverse of Tolstoy’s quote, as if “all Japanese boards that succeed do so in a different way, but all boards that fail, do so in the same way”  If so, one would think this should make it easier to avoid governance failures.

My first experience as an outside director in Japan began in the year 2000, when the M&A advisory boutique that I led at that time, JTP Corporation, advised the US firm of MapInfo to conclude a strategic alliance and invest in a 25% capital raise by Alps Mapping in Nagoya.  Alps (as it was known in Japanese) was an unlisted firm that was the third largest map publisher in Japan, and had excellent map data.  The company was planning to go public at some time in the future.  Because MapInfo had no staff in Japan at the time, I was nominated by MapInfo to serve on the board of Alps going forward, to protect not only its interests but also those of  other shareholders, because MapInfo had no staff in Japan at the time.