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>The increase in foreign ownership and the decline in cross-shareholdings have encouraged management reform. In order for engagement to be effective, it is essential to further reduce cross shareholdings.</li>
<li>Reasonable explanation of the reasons for such transfers as changes in the purpose of policy shareholding or contributions to retirement benefit trust must be provided in the annual securities report.</li>
<li>Rising stock prices increase the value of policy shareholdings. To accelerate the reduction of policy shareholdings, numerical targets should be published, such as by setting milestones.</li>
</ul>


The increase in foreign ownership and the decline in cross-shareholdings have encouraged management reform. In order for engagement to be effective, it is essential to further reduce cross shareholdings.
Reasonable explanation of the reasons for such transfers as changes in the purpose of policy shareholding or contributions to retirement benefit trust must be provided in the annual securities report.
Rising stock prices increase the value of policy shareholdings. To accelerate the reduction of policy shareholdings, numerical targets should be published, such as by setting milestones.


Amidst Changes in Purpose of Policy Shareholdings, We Should Note Whether They Are Really Decreasing

<ul>
<li>The percentage of shares held by individuals and trust banks fell from 17.6% to 16.9% and from 22.6% to 22.1%, respectively. Increasing individual investors' investment in Japanese equities isn't easy.</li>
<li>The presence of overseas investors will increase, as the percentage of shares held by foreigners, which has reached a record high, is expected to remain high in the future.</li>
<li>The percentage of shares held by corporations decreased slightly, and cross-shareholdings are gradually being unwound. The gradual decline is likely to continue in the future.</li>
</ul>


The percentage of shares held by individuals and trust banks fell from 17.6% to 16.9% and from 22.6% to 22.1%, respectively. Increasing individual investors' investment in Japanese equities isn't easy.
The presence of overseas investors will increase, as the percentage of shares held by foreigners, which has reached a record high, is expected to remain high in the future.
The percentage of shares held by corporations decreased slightly, and cross-shareholdings are gradually being unwound. The gradual decline is likely to continue in the future.


Foreign Ownership, Which Has Reached a Record High of 31.8%, Will Continue to Play a Major Role

<ul>
<li>The government's goal of "30% women in management positions by 2030" should be included by a bill to be submitted to the ordinary Diet session in 2025.</li>
<li>The bill should include specific measures to provide government support to companies that created environment in which women can give birth and raise children without having to leave their jobs.</li>
<li>Not only is the value of the goods and services from the women's perspective overlooked, as well as the underutilization of human resources from about half of the universes.</li>
</ul>


The government's goal of "30% women in management positions by 2030" should be included by a bill to be submitted to the ordinary Diet session in 2025.
The bill should include specific measures to provide government support to companies that created environment in which women can give birth and raise children without having to leave their jobs.
Not only is the value of the goods and services from the women's perspective overlooked, as well as the underutilization of human resources from about half of the universes.


Will Mandatory Reporting of the Ratio Alone Lead to Higher Ratio of Women in Managerial Positions?

<ul>
<li>TSE growth market, which institutional investors distance themselves from due to its low liquidity, is a market where gamblers who focus on price movements gobble up one IPO after another.</li>
<li>To convert users from gamblers to investors, companies with long-term growth potential should be listed. Raising the market capitalization criteria for Growth Market could improve the quality of IPOs.</li>
<li>Meanwhile, in order to improve the quality of the TSE Growth Market, existing listed companies should consider going private through an MBO.</li>
</ul>


TSE growth market, which institutional investors distance themselves from due to its low liquidity, is a market where gamblers who focus on price movements gobble up one IPO after another.
To convert users from gamblers to investors, companies with long-term growth potential should be listed. Raising the market capitalization criteria for Growth Market could improve the quality of IPOs.
Meanwhile, in order to improve the quality of the TSE Growth Market, existing listed companies should consider going private through an MBO.


Smaller PE Funds May Have Opportunities to Invest in MBOs of TSE Growth Market Companies

<ul>
<li>The positive impact of increased dividends must be discounted because seniors, who receive most dividends, are non-working generations and are more vulnerable to the negative impact of rising consumer prices.</li>
<li>The high level of cash on hand should be used effectively for investments and shareholder returns. Looking at listed companies as a whole, both ROE and DOE are below FY2018.</li>
<li>Although the too-low dividend payout of Japanese companies have been corrected, the fact that ROE is still low means that few companies are chosen as investment targets by global investors.</li>
</ul>


The positive impact of increased dividends must be discounted because seniors, who receive most dividends, are non-working generations and are more vulnerable to the negative impact of rising consumer prices.
The high level of cash on hand should be used effectively for investments and shareholder returns. Looking at listed companies as a whole, both ROE and DOE are below FY2018.
Although the too-low dividend payout of Japanese companies have been corrected, the fact that ROE is still low means that few companies are chosen as investment targets by global investors.


To Be Selected by Global Investors as an Investment Target, Increasing Cash Flow Is Crucial

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)

Amidst Changes in Purpose of Policy Shareholdings, We Should Note Whether They Are Really Decreasing

I would like to discuss the issues on the June 15 Nikkei article, "Reduction of Policy Shareholdings, Disappearing Stable Shareholders: Management...

Metrical Inc

Foreign Ownership, Which Has Reached a Record High of 31.8%, Will Continue to Play a Major Role

I would like to discuss the issues on the summary of the document "Results of the Survey of Stock Distribution in FY2023" disclosed by the TSE on...

Metrical Inc

Will Mandatory Reporting of the Ratio Alone Lead to Higher Ratio of Women in Managerial Positions?

I would like to discuss the issues on the June 27 Nikkei article, "Companies with 301 or more employees must disclose ratio of female managers."

Metrical Inc

Smaller PE Funds May Have Opportunities to Invest in MBOs of TSE Growth Market Companies

I would like to discuss the issues on the June 24 Nikkei article, "TSE Growth Market Shrinking, IPOs Smaller, Drivers Long Absent."

Metrical Inc

To Be Selected by Global Investors as an Investment Target, Increasing Cash Flow Is Crucial

I would like to discuss the issues on the June 20 Nikkei Shimbun article, “Record 40% of Companies Increasing Dividends; Households Receive 3.6...

Metrical Inc