Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>TSE seems reluctant to raise the market capitalization criteria for listing on Growth Market, but wants to encourage management to grow after IPO by raising the criteria for maintaining listing.</li>
<li>The reason why companies don't grow after IPO is that IPOs are often conducted for tax savings for founders and for other reasons without any intention to grow.</li>
<li>It is questionable whether the new listing maintenance criteria will help these companies grow and whether the verbal intervention in the listing review process will be successful.</li>
</ul>


TSE seems reluctant to raise the market capitalization criteria for listing on Growth Market, but wants to encourage management to grow after IPO by raising the criteria for maintaining listing.
The reason why companies don't grow after IPO is that IPOs are often conducted for tax savings for founders and for other reasons without any intention to grow.
It is questionable whether the new listing maintenance criteria will help these companies grow and whether the verbal intervention in the listing review process will be successful.


Can Growth Market Reform Succeed in a Structure of Interdependence of IPO Ecosystem Stakeholders?

<ul>
<li>Japan's declining % global GDP and the number of top companies in market capitalization shows that simply boosting profits through yen depreciation left behind the growth speed of global competitors.</li>
<li>While many Japanese companies tried to improve profit margins by reducing labor costs and other expenses, few have managed to improve gross profit margins, which relate to their business models.</li>
<li>The fact that few companies have taken steps to shift to higher value-added products and services is why the yen rate remains a key factor in stock valuations.</li>
</ul>


Japan's declining % global GDP and the number of top companies in market capitalization shows that simply boosting profits through yen depreciation left behind the growth speed of global competitors.
While many Japanese companies tried to improve profit margins by reducing labor costs and other expenses, few have managed to improve gross profit margins, which relate to their business models.
The fact that few companies have taken steps to shift to higher value-added products and services is why the yen rate remains a key factor in stock valuations.


Companies May Worked on Raising OP Margin in Minor Ways Without Working on Raising Gross Margins

<ul>
<li>Eliminating income limits on child allowances seems to be the right policy because the wealthier families have more children. However, it lacks viewpoints toward the growing number of unmarried people.</li>
<li>It seems effective to solve the problem of the growing income disparity and the child-rearing/housework being disproportionately placed on women, and taking appropriate measures for those who desire diverse lifestyles.</li>
<li>Policies don't reach the ever-increasing number of singles. Rather than solutions to declining birthrate, priority is given to policies that distribute money to those who are more certain to vote.</li>
</ul>


Eliminating income limits on child allowances seems to be the right policy because the wealthier families have more children. However, it lacks viewpoints toward the growing number of unmarried people.
It seems effective to solve the problem of the growing income disparity and the child-rearing/housework being disproportionately placed on women, and taking appropriate measures for those who desire diverse lifestyles.
Policies don't reach the ever-increasing number of singles. Rather than solutions to declining birthrate, priority is given to policies that distribute money to those who are more certain to vote.


Political Problems Are Preventing a Solution to the Problem of Declining Birthrates

<ul>
<li>70% of Tokyo market is traded by overseas investors, so even companies with smaller market capitalization need to catch the attention of overseas investors by increasing their return on capital.</li>
<li>It is possible that the difference in stock valuations over the past few years has been due to a greater difference in return on capital between large-cap and small-cap stocks.</li>
<li>Skillful IR alone is not enough to raise stock price valuations. The IR department must have management who can execute management strategies and personnel who can formulate persuasive plans.</li>
</ul>


70% of Tokyo market is traded by overseas investors, so even companies with smaller market capitalization need to catch the attention of overseas investors by increasing their return on capital.
It is possible that the difference in stock valuations over the past few years has been due to a greater difference in return on capital between large-cap and small-cap stocks.
Skillful IR alone is not enough to raise stock price valuations. The IR department must have management who can execute management strategies and personnel who can formulate persuasive plans.


It's Not a Lack of Analyst Coverage that Is Causing the Lack of Trading.....

<ul>
<li>The profit outlook for many Japanese companies may not be good enough for overseas investors, who are selecting the best investments from among stocks around the world.</li>
<li>In FY2025, both sales and recurring profit are expected to slow in the manufacturing sector. This casts a shadow over TSE stock prices, which are dominated by manufacturing companies.</li>
<li>Companies whose corporate performance are at a standstill has good opportunity to show investors how it will use the proceeds from the sale of cross-held shares to expand corporate value.</li>
</ul>


The profit outlook for many Japanese companies may not be good enough for overseas investors, who are selecting the best investments from among stocks around the world.
In FY2025, both sales and recurring profit are expected to slow in the manufacturing sector. This casts a shadow over TSE stock prices, which are dominated by manufacturing companies.
Companies whose corporate performance are at a standstill has good opportunity to show investors how it will use the proceeds from the sale of cross-held shares to expand corporate value.


Now Is the Time to Turn the Slowdown in Profit Growth into an Opportunity

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

Can Growth Market Reform Succeed in a Structure of Interdependence of IPO Ecosystem Stakeholders?

I would like to discuss the issues in the document “Sinking TSE Growth Market: Listing Goal Vices, Investor Detachment” released by the TSE on...

Metrical Inc

Companies May Worked on Raising OP Margin in Minor Ways Without Working on Raising Gross Margins

I would like to discuss the February 25 Nikkei article, “Corporate earnings, shrinking effect of yen's depreciation: 50% of companies whose fiscal...

Metrical Inc

Political Problems Are Preventing a Solution to the Problem of Declining Birthrates

I would like to discuss the Nikkei article of March 3, 2025 “How Effective Are Child Allowances? The “first child barrier” in measures to prevent a...

Metrical Inc

It's Not a Lack of Analyst Coverage that Is Causing the Lack of Trading.....

I would like to discuss the issues on the March 2 Nikkei article, “Analyst Shortage in Japan: 70% of Stocks Lacking Analysts, Wall for Investment...

Metrical Inc

Now Is the Time to Turn the Slowdown in Profit Growth into an Opportunity

I would like to discuss the February 22 Nikkei Shimbun article, "Listed companies increase profits in 70% of industries from April to December, net...

Metrical Inc