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 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

<ul>
<li>For first time in 30 years, the fund is back, matching the demand of companies that want to reduce cross-holdings immediately and companies that want more time to sell cross-holdings.</li>
<li>If the voting rights of cross-shareholdings contributed to the fund are retained, corporate governance will remain an issue until the fund's investment is terminated.</li>
<li>In reviewing recently filed annual securities reports, we often see cases where cross-held shares in more closely related companies are contributed to retirement benefit trusts instead of being sold.</li>
</ul>


For first time in 30 years, the fund is back, matching the demand of companies that want to reduce cross-holdings immediately and companies that want more time to sell cross-holdings.
If the voting rights of cross-shareholdings contributed to the fund are retained, corporate governance will remain an issue until the fund's investment is terminated.
In reviewing recently filed annual securities reports, we often see cases where cross-held shares in more closely related companies are contributed to retirement benefit trusts instead of being sold.


A New Type Of "Deemed Shareholding" Has Emerged!

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

<ul>
<li>We continue to believe a 1-4-month pullback/consolidation is ongoing. Important supports have been violated, including $110 on MSCI ACWI (ACWI-US) and $41 on MSCI EM (EEM-US).</li>
<li>We're shifting our outlook to neutral on $ACWI after being bullish since early-November 2023. Major price breakdowns combined with deteriorating market dynamics have increased the odds of a topping pattern.</li>
<li>Also downgrading Japan to market weight. 7/25/24 we said "Japan's TOPIX breaking below 2800-2815 is near-term bearish, suggests it could pull back to its long-term uptrend, or worse."</li>
</ul>


We continue to believe a 1-4-month pullback/consolidation is ongoing. Important supports have been violated, including $110 on MSCI ACWI (ACWI-US) and $41 on MSCI EM (EEM-US).
We're shifting our outlook to neutral on $ACWI after being bullish since early-November 2023. Major price breakdowns combined with deteriorating market dynamics have increased the odds of a topping pattern.
Also downgrading Japan to market weight. 7/25/24 we said "Japan's TOPIX breaking below 2800-2815 is near-term bearish, suggests it could pull back to its long-term uptrend, or worse."


Downgrading Japan; Stay Defensive; Downgrading Outlook on Global Equities $ACWI to Neutral

<ul>
<li>The government only considers foreign personnel as labor force and accepts them in industries where labor is in short supply and places restrictions on their transfer to other industries.</li>
<li>Imposing a Japanese language test on long-term residents who are eligible to stay in Japan may result in the loss of opportunities to recruit talented foreign personnel.</li>
<li>The government has been unable to step forward to "respect human rights and share diverse values.” If Japanese people do not change, we will never be able to embrace diversity.</li>
</ul>


The government only considers foreign personnel as labor force and accepts them in industries where labor is in short supply and places restrictions on their transfer to other industries.
Imposing a Japanese language test on long-term residents who are eligible to stay in Japan may result in the loss of opportunities to recruit talented foreign personnel.
The government has been unable to step forward to "respect human rights and share diverse values.” If Japanese people do not change, we will never be able to embrace diversity.


If We Don't Change the Way We Used to Do Things, We Cannot Embrace Diverse Values

<ul>
<li>The cost is somewhat reduced for the user because of the higher weighting of more liquid stocks. Meanwhile, selling pressure is inevitable for less liquid companies whose weights are reduced.</li>
<li>Even if the number of stocks decreases, 1,200 stocks isn't small number. Also, even though the market capitalization of the components has increased, approximately 73 billion yen isn't sufficiently liquid.</li>
<li>With calls for increased engagement, the number of issues remains too large for domestic asset managers, where passive funds account for a high percentage of AUM.</li>
</ul>


The cost is somewhat reduced for the user because of the higher weighting of more liquid stocks. Meanwhile, selling pressure is inevitable for less liquid companies whose weights are reduced.
Even if the number of stocks decreases, 1,200 stocks isn't small number. Also, even though the market capitalization of the components has increased, approximately 73 billion yen isn't sufficiently liquid.
With calls for increased engagement, the number of issues remains too large for domestic asset managers, where passive funds account for a high percentage of AUM.


The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement, Though

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)

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

A New Type Of "Deemed Shareholding" Has Emerged!

I would like to discuss the issues on the June 20 Nikkei article, "SBI-affiliated cross-shareholding dissolution support fund to reach 100 billion...

Metrical Inc

Downgrading Japan; Stay Defensive; Downgrading Outlook on Global Equities $ACWI to Neutral

Downgrading Japan TOPIX, Nikkei; Stay Defensive; Downgrading Outlook on Global Equities $ACWI $EEM to Neutral; Many Risk-Off Signals increase odds...

Vermilion Research

If We Don't Change the Way We Used to Do Things, We Cannot Embrace Diverse Values

I would like to discuss the issues on the June 17 Nikkei article, " Training Work to Increase Motivation and Peace of Mind for Foreign Talent.”

Metrical Inc

The Number of TOPIX Components Should Be More Reduced to Raise the Quality of Engagement, Though

I would like to discuss the issues raised in the disclosure "Overview of the TOPIX etc. Revision" published by TSE on June 19.

Metrical Inc