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>Nominal GDP grew 1.8% from 2012 to 2017, higher than the annual average over the past 33 years, in anticipation of an escape from deflation, but TOPIX gains have stalled.</li>
<li>Nominal GDP from 2021 to 2023 will grow 3.8% per year, far above the average of the past 33 years, and the correlation with TOPIX is even higher.</li>
<li>With average P/B showing little correlation with TOPIX after 2020, expanding nominal earnings without losing out to rising prices seems to be a more important factor for stock price appreciation.</li>
</ul>


Nominal GDP grew 1.8% from 2012 to 2017, higher than the annual average over the past 33 years, in anticipation of an escape from deflation, but TOPIX gains have stalled.
Nominal GDP from 2021 to 2023 will grow 3.8% per year, far above the average of the past 33 years, and the correlation with TOPIX is even higher.
With average P/B showing little correlation with TOPIX after 2020, expanding nominal earnings without losing out to rising prices seems to be a more important factor for stock price appreciation.


In Correlation with TOPIX, Nominal GDP Has Become Even Higher, While P/B Has Been Scarce Since 2020

<ul>
<li>ETF sale is pie in the sky if the dividend income from ETFs held by BOJ is used to cover the interest payments associated with lifting of negative interest rates.</li>
<li>ETFs held by the Bank of Japan, which account for 7% of prime market capitalization, are actually reducing the number of actual tradable shares and hindering trading liquidity.</li>
<li>Furthermore, ETFs held by BOJ, which don't indicate their intention to be shareholders, may be voting in favor of the company's proposal as new silent shareholders in place of cross-shareholdings.</li>
</ul>


ETF sale is pie in the sky if the dividend income from ETFs held by BOJ is used to cover the interest payments associated with lifting of negative interest rates.
ETFs held by the Bank of Japan, which account for 7% of prime market capitalization, are actually reducing the number of actual tradable shares and hindering trading liquidity.
Furthermore, ETFs held by BOJ, which don't indicate their intention to be shareholders, may be voting in favor of the company's proposal as new silent shareholders in place of cross-shareholdings.


ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders

<ul>
<li>While more companies should include the cost of capital in their disclosures, investors are demanding that management present specific solutions discussed by the board of directors to solve their company's problems.</li>
<li>Many companies with high foreign shareholding disclose their own management strategies, while companies without high foreign shareholding tend to lack the ability to think of measures to increase profitability.</li>
<li>The TSE's newly established department supports such companies to ensure that all listed companies are not left behind, but that seems to go against the quality of the market.</li>
</ul>


While more companies should include the cost of capital in their disclosures, investors are demanding that management present specific solutions discussed by the board of directors to solve their company's problems.
Many companies with high foreign shareholding disclose their own management strategies, while companies without high foreign shareholding tend to lack the ability to think of measures to increase profitability.
The TSE's newly established department supports such companies to ensure that all listed companies are not left behind, but that seems to go against the quality of the market.


<ul>
<li>The essence of the declining birthrate problem is the increasing number of young people who aren't getting married, but the government has been mismatched in focusing support on married couples.</li>
<li>Since the reasons for unwillingness to marry are "financial reasons" for men and "limitation of activities and time" for women, along with increased income, child-rearing and housework shouldn't burden women.</li>
<li>Companies should shift to business model that allows them to raise profit margins without resorting to cost-cutting, raise employee salaries, and create work environment that supports child-rearing and family responsibilities.</li>
</ul>


The essence of the declining birthrate problem is the increasing number of young people who aren't getting married, but the government has been mismatched in focusing support on married couples.
Since the reasons for unwillingness to marry are "financial reasons" for men and "limitation of activities and time" for women, along with increased income, child-rearing and housework shouldn't burden women.
Companies should shift to business model that allows them to raise profit margins without resorting to cost-cutting, raise employee salaries, and create work environment that supports child-rearing and family responsibilities.


The Rising Number of Young People Unmarried Is the Cause of Low Birthrate. What Should Companies Do?

<ul>
<li>Market structure is the main factor hindering trading liquidity. In addition to the cross-holdings that remain, ETFs held by the Bank of Japan cast a shadow over trading liquidity.</li>
<li>Companies are key on this issue. In addition to accelerating to reducte cross-shareholdings, English-language disclosure of annual securities reports, which are in high demand by long-term investors, should be promoted.</li>
<li>If long-term overseas investors get serious about investing in Japanese equities, the increase in trading liquidity in Japanese equities will be sustainable, and broker coverage will naturally expand.</li>
</ul>


Market structure is the main factor hindering trading liquidity. In addition to the cross-holdings that remain, ETFs held by the Bank of Japan cast a shadow over trading liquidity.
Companies are key on this issue. In addition to accelerating to reducte cross-shareholdings, English-language disclosure of annual securities reports, which are in high demand by long-term investors, should be promoted.
If long-term overseas investors get serious about investing in Japanese equities, the increase in trading liquidity in Japanese equities will be sustainable, and broker coverage will naturally expand.


Solving the Issue of Increasing Trading Liquidity in Japanese Stocks Is More Than Analyst Coverage..

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)

In Correlation with TOPIX, Nominal GDP Has Become Even Higher, While P/B Has Been Scarce Since 2020

I would like to discuss the issues on the February 23 Nikkei article, "Foreign Money Rediscovers Japan, Expecting a Shift to a 'Changing Country'."

Metrical Inc

ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders

I would like to discuss the issues on the February 20 Nikkei article, "Bank of Japan Unable to Sell ETFs Even as Stock Prices Near Highs, Holds 67...

Metrical Inc

Will the TSE's Convoy System Work?

I would like to discuss the issues on the February 19 Nikkei article, "TSE Opens Specialized Department to Support Listed Companies' Disclosure in...

Metrical Inc

The Rising Number of Young People Unmarried Is the Cause of Low Birthrate. What Should Companies Do?

I would like to discuss the issues on the February 16 Nikkei article, "Marriage Ice Age": Future Unseen; Number of Marriages to Fall Below 500,000...

Metrical Inc

Solving the Issue of Increasing Trading Liquidity in Japanese Stocks Is More Than Analyst Coverage..

I would like to discuss the issues on the February 11 Nikkei Shimbun article, "Investment in Japanese Stocks 'A Barrier to Investment': 30% of...

Metrical Inc