The Board Director Training Institute of Japan (BDTI)

METRICAL: CG Stock Performance (Japan)-August 2024

2024-09-03 posted by Aki Matsumoto

After a sharp downturn at the beginning of the month, the August stock market gradually calmed down and recovered much of the decline by the end of the month.
In August, the CG Top 20 stock market outperformed both TOPIX and JPX400 for the fourth consecutive month.

The stock market in August, which started following the 0.25% interest rate hike decided at the Bank of Japan’s July monetary policy meeting, fell sharply in confusion from the unwinding of the yen carry trade due to the significantly rising Japanese yen. Thereafter, the yen gradually regained its stability, and the US equity market was strong after passing key events such as Fed Chair Jerome Powell’s speech at Jackson Hole and Nuvidea financial results, which led to a buy-back Japanese stocks rally.
The TOPIX and JPX400 indexes fell 1.96% and 1.23%, respectively, in May, while the CG Top 20 index outperformed significantly both indices up by 2.89%.

The composites of CG Top 20 stocks has been replaced as of July 1.
The CG Top 20 has been revised as of July 1. EBARA CORPORATION (6361), TechnoPro Holdings (6028), ENEOS Holdings (5020), INNOTEC (9880), United Arrows (7606), and Persol Holdings (2181) were newly added to the list, while H.U. Group Holdings (2146), Kao Corporation (4452), Kao (4452), Wacom (6727), K’s Holdings Eisai (8282), and Trend Micro (4704) were removed. (2146), Kao (4452), Wacom (6727), K’s Holdings (8282) Eisai (4523), and Trend Micro (4704) were removed. Details of the component stocks are shown in the table below.

What Needs to be Added to the “Action Program for Accelerating Corporate Governance Reform: From Form to Substance”

2024-08-23 posted by Nicholas Benes

Nicholas Benes
Representative Director, The Board Director Training Institute of Japan (BDTI)
(The following is my personal opinion and not that of any organization. This is a translation of the original article.)

As sent to prospective candidates to be the next Prime Minister, in no particular order:
Chief Cabinet Secretary Yoshimasa Hayashi, Minister for Foreign Affairs Yoko Kamikawa, Minister of Economy, Trade and Industry Ken Saito, Minister for Digital Transformation Taro Kono, Minister in Charge of Economic Security Sanae Takaichi, Secretary-General of the Liberal Democratic Party Toshimitsu Motegi, House of Representatives Member Shigeru Ishiba, House of Representatives Member Shinjiro Koizumi, House of Representatives Member Takayuki Kobayashi, House of Representatives Member Seiko Noda, House of Representatives Member Katsunobu Kato.

CC: Prime Minister Fumio Kishida, Deputy Chairman of the Liberal Democratic Party’s Political Research Committee Masahiko Shibayama, Parliamentary Vice-Minister of Health, Labor and Welfare of the Liberal Democratic Party Akihisa Shiozaki, Deputy Secretary-General of the Liberal Democratic Party Seiji Kihara, House of Representatives Member Kenji Nakanishi.

Japan’s Corporate Governance Code (CGC) and the investor Stewardship Code need to function as “two wheels” of a cart. I had advocated this since 2013, and when I had the opportunity to formally propose the establishment of the CGC to the Liberal Democratic Party in 2014[1], I insisted that the most important thing was to “promote the disclosure of information that enables one to verify governance structure and substance” at firms.

“Governance and oversight are more likely to function effectively on a board that has a majority of truly independent and qualified independent directors.” As of 2014, this dynamic had been recognized in many countries around the world. At the time, I thought that if companies disclosed their actual governance practices and stewardship by investors started functioning well, Japan, as a developed country, would naturally adopt a similar stance within the next five years or so.

Ten years later, however, there is still no serious discussion of these two issues in Japan. Now that global investors are paying more attention to the Japanese stock market, I believe it is time for us to confront these core issues and take the following steps to speed up Japan’s governance transformation.

Oasis & BDTI’s “Director Training for Women Initiative 2024” Recruitment Results

2024-08-05 posted by Admin

For the third consecutive year, Oasis Management Co. (“Oasis”), graciously sponsored scholarships in support of outstanding women who would go on to receive training from The Board Director Training Institute of Japan (“BDTI”). Between April 1, 2024 and June 30, 2024, Oasis covered the full cost of training for women with outstanding qualities who participated in one of BDTI’s director training courses.

With many applications from talented women, 91 women were selected to receive scholarships this year. More than half of the scholarship recipients took BDTI’s Governance “Juku”, BDTI’s core director training taught in Japanese, while the rest participated in either Advanced Outside Director Training, BDTI’s Director Boot Camp taught in English, BDTI’s Role Play course, or went through e-Learning (which consists of 4 digital courses in total).

【METRICAL】Increasing Profitability to Gain Support from Overseas Investors Is a Condition for Higher Valuation

2024-08-02 posted by Aki Matsumoto

In this article, I would like to try to summarize the recent analysis in this paper.

Metrical Analysis
We began analyzing corporate governance of Japanese companies in full swing in June 2015, covering 500 companies at that time. Since then, from February 2018 to the present, I have analyzed approximately 1,800 companies. These 1,800 companies are used as the universe and are updated monthly based on publicly available information such as annual securities reports, corporate governance reports, and financial statements. Metrical’s corporate governance analysis is divided into Board Practices and Key Actions. This is because even if the board structure and other board practices are formally in place, it is skeptical that they are being used to manage the company to create value. This is based on the hypothesis that, ideally, improvements in corporate governance will lead directly to value creation, or that improvements in board practices will create value through key actions such as cash allocation, share repurchases/reirements, etc. Therefore, I believe that key actions should be added to corporate governance evaluations.

METRICAL: CG Stock Performance (Japan): July 2024

2024-08-01 posted by Aki Matsumoto

In July, the stock market was highly volatile, rising sharply at the beginning of the month, then falling sharply toward the end of the month, before recovering at the end of the month. In July, the CG Top 20 significantly outperformed the TOPIX and JPX400 for the third consecutive month. The July stock market, which […]

METRICAL: Improved Profitability to Attract Overseas Investors Key to Raise Valuation Even After TSE’s Request

2024-07-10 posted by Aki Matsumoto

One year has passed since the TSE requested a P/B increase at the end of March 2023 (“Request for action to achieve cost of capital and stock price conscious management”). Valuations are expected to increase as stock prices rise. In this analysis, I examined what trends were observed in the companies that increased their Tobin’s Q in the Metrical universe during the period from March 2023 to March 2024.

In the comparable Metrical universe of 1,750 companies from March 2023 to March 2024, the analysis is divided into 5 groups (>50% increase, >25% to <50% increase, >0% to <25% increase, no change, and decrease) for each item in terms of the percentage change in Tobin's Q. The median percent change in Tobin's Q during this period was 2.06%. The table below profiles the 1,750 companies in the Metrical universe, dividing them into five groups (>50% increase, >25% to <50% increase, >0% to <25% increase, no change, and decrease) by the percentage change in Tobin's Q over the one-year period from March 2023 to March 2024. We can see that companies whose Tobin's Q increased by more than 50% include those with high Tobin's Q, average ROE and ROA over the past three years, and foreign shareholding ratios. Although companies whose Tobin's Q rose by more than 50% in terms of market capitalization gave up the top spot to companies whose Tobin's Q rose by more than 25% but less than 50%, the relatively large market capitalization of these companies caused their Tobin's Q to rise. The companies whose Tobin's Q increased by more than 50% and by more than 25% but less than 50% continued to increase their ROE and ROA.

METRICAL: CG Top20 Stock Performance of Japan vs. TOPIX (June2024)

2024-07-04 posted by Aki Matsumoto

In June, the stock market was pushed down in the middle of the month amid the lack of active buyers, but recovered and closed higher at the end of the month.

However, the stock market fell sharply in the middle of the month due to speculation that a certain financial institution, which had suffered heavy losses from its investment in foreign bonds, had conducted an operation to sell passive equity funds to take profits. The stock market then calmed down toward the end of the month and closed slightly higher than at the end of the previous month.
The TOPIX and JPX400 indexes gained 1.40% and 1.63%, respectively, in May, while the CG Top 20 index outperformed significantly both indices up by 2.04%.

METRICAL:Drivers of Corporate Governance Improvement Are the Percentage of Foreign Shareholdings

2024-06-20 posted by Aki Matsumoto

In January 2024, Japanese stocks rose sharply as overseas investors bought Japanese stocks for the first time since June 2023. There has been no change in the composition of Japanese equities driven by overseas investors, who account for over 70% of the TSE’s trading volume. Meanwhile, since the TSE’s request at the end of March 2023, listed companies have been struggling to raise their stock price valuations (P/B). We have also seen an increase in disclosures from listed companies that seem to be expecting overseas investors to buy their shares. In this article, we will focus on the ratio of foreign shareholdings and analyze the trends in companies in which overseas investors invest. The contents of this article should be of interest not only to overseas investors, but also to listed companies.

The Metrical universe of 1,822 companies (as of January 2024) is divided into five groups (30% or more, 20% or more but less than 30%, 15% or more but less than 20%, 10% or more but less than 15%, and less than 10%) based on foreign shareholding ratio and analyzed for each category. The median foreign shareholding ratio is 15%; companies with 15% or more can be said to have higher foreign shareholding ratios. Also, as discussed in my previous article “Takeover Defense Measures and Foreign Shareholder Ratio,” there is a sort of threshold at 30%. When the foreign shareholding ratio exceeds 30%, it becomes more difficult for the company to secure 1/3 of the special resolution at the shareholders’ meeting, and thus the influence of foreign shareholders becomes stronger, which in turn can be expected to improve the company’s management.

JWLI – Champion of Change Japan Award (CCJA) 2024

2024-05-14 posted by Admin

The Champion of Change Japan Award (CCJA) was established in 2017 to honor women leaders who tirelessly address the most pressing needs in their communities in Japan. Selected from 200 nominations annually and announced at an award ceremony in the fall, a grand champion received 1,000,000 yen and four awardees receive 250,000 yen each.

Detail/Nominate: https://jwliccja.org/apply-3/

Deadline (extended): Sunday, May 19 – Japan Time

Higher ROE & ROA Are Keys to Higher Valuation, but This Wasn’t Easy for Companies with Low Valuation

2024-05-08 posted by Aki Matsumoto

I would like to examine which companies have experienced an increase in stock valuations over the past year, and have analyzed the characteristics of the 1,755 companies in the comparable Metrical universe whose Tobin’s Q increased between the end of December 2022 and the end of December 2023. The table below shows the median value of the change in Tobin’s Q for each of the six groups.

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