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 lack of laws mandating female directors and the absence of specific numerical targets for ％ female directors in Corporate Governance Code have slowed the increase in % female directors.</li>
<li>The lack of understanding of the value of ensuring diversity on the board on companies is serious, as only 9.1% of companies that disclosed skills-matrix adopted "diversity" as a criterion.</li>
<li>It should be a catalyst for companies to understand the value of ensuring diversity on their boards, not merely numbers-crunching that a company only needs to hire one female director.</li>
</ul>


The lack of laws mandating female directors and the absence of specific numerical targets for ％ female directors in Corporate Governance Code have slowed the increase in % female directors.
The lack of understanding of the value of ensuring diversity on the board on companies is serious, as only 9.1% of companies that disclosed skills-matrix adopted "diversity" as a criterion.
It should be a catalyst for companies to understand the value of ensuring diversity on their boards, not merely numbers-crunching that a company only needs to hire one female director.


Legislation to Promote Women Directors Is the Solution, but the Root Cause Is Why It Cannot Be Done

<ul>
<li>The decline in the working-age population is not merely a decrease in the number of workers; it causes a loss of dynamism in society as a whole.</li>
<li>The "5-year rotational use of foreign workers without the assumption of permanent residency," not immigration, is overshadowed by human rights issues.</li>
<li>Besides the high cost of education, an increasing number of people are choosing not to marry, and it is necessary to create a society that respects diverse lifestyles.</li>
</ul>


The decline in the working-age population is not merely a decrease in the number of workers; it causes a loss of dynamism in society as a whole.
The "5-year rotational use of foreign workers without the assumption of permanent residency," not immigration, is overshadowed by human rights issues.
Besides the high cost of education, an increasing number of people are choosing not to marry, and it is necessary to create a society that respects diverse lifestyles.


Behind the Issue of Population Decline Is Also the Issue of Human Rights

<ul>
<li>It's doubtful that if the outcomes of factor analysis of Berkshire Hathaway's portfolio stocks and screened to Japanese stocks would be the stocks that Buffett would want to invest in.</li>
<li>Berkshire Hathaway wouldn't invest in a Japanese company if there were companies in other countries with the same type of business that are more competitive and worthy of investment.</li>
<li>Investors continue to look for companies that few investors are aware of, as stock prices are often high for companies that have competitive advantages and promising future cash flow growth.</li>
</ul>


It's doubtful that if the outcomes of factor analysis of Berkshire Hathaway's portfolio stocks and screened to Japanese stocks would be the stocks that Buffett would want to invest in.
Berkshire Hathaway wouldn't invest in a Japanese company if there were companies in other countries with the same type of business that are more competitive and worthy of investment.
Investors continue to look for companies that few investors are aware of, as stock prices are often high for companies that have competitive advantages and promising future cash flow growth.


Isn't It Too Much to Expect Instantaneous Screening to Yield the Same Shares as Buffett's Approach?

<ul>
<li>It's hoped Buffett's visit to Japan will encourage managers to review their business strategies to develop products with competitive advantage and value, so that more companies can expect sustainable growth.</li>
<li>Companies with low OP Margin will need to rethink their fundamental strategy to raise OP Margin for mid-to-long term, as ROE may only temporarily rise even if cash is reduced.</li>
<li>There are many stocks in Japan with low valuations, but while there are many cash cow companies, there aren't many undervalued stocks that can generate cash flow for sustainable growth.</li>
</ul>


It's hoped Buffett's visit to Japan will encourage managers to review their business strategies to develop products with competitive advantage and value, so that more companies can expect sustainable growth.
Companies with low OP Margin will need to rethink their fundamental strategy to raise OP Margin for mid-to-long term, as ROE may only temporarily rise even if cash is reduced.
There are many stocks in Japan with low valuations, but while there are many cash cow companies, there aren't many undervalued stocks that can generate cash flow for sustainable growth.


If Japan Were Treasure Trove of Value Stocks, Global Investors Would Not Underweight Japanese Stocks

<ul>
<li>Examining ROE contribution requires first reducing cash and raising Asset Turnover and Financial Leverage. Also, regarding stock price appreciation, increasing ROE+DOE, which has higher correlation with TOPIX, will be effective.</li>
<li>Stock performance is correlated with higher foreign ownership and Tobin's q, indicating that overseas investors are also more interested in cash-rich, growth policy, dividend policy, policy-shareholdings, treasury-share retirements, AGM/IR disclosures.</li>
<li>TSE's adoption of P/B, made it easier to compare management capabilities with that of other companies. Managers who can't achieve sufficient stock performance will have to seek help from shareholder-returns.</li>
</ul>


Examining ROE contribution requires first reducing cash and raising Asset Turnover and Financial Leverage. Also, regarding stock price appreciation, increasing ROE+DOE, which has higher correlation with TOPIX, will be effective.
Stock performance is correlated with higher foreign ownership and Tobin's q, indicating that overseas investors are also more interested in cash-rich, growth policy, dividend policy, policy-shareholdings, treasury-share retirements, AGM/IR disclosures.
TSE's adoption of P/B, made it easier to compare management capabilities with that of other companies. Managers who can't achieve sufficient stock performance will have to seek help from shareholder-returns.


Managers Should Consider That "TSE's Request" Has Changed the Rules of the Game

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)

Legislation to Promote Women Directors Is the Solution, but the Root Cause Is Why It Cannot Be Done

I have considered the issues on the April 19 Nikkei article, " Norwegian Pension Fund Votes Against Zero Female Directors in Japanese Companies."

Metrical Inc

Behind the Issue of Population Decline Is Also the Issue of Human Rights

I would like to discuss the issues on the April 16 Nikkei article, "Put a Brake" on Population Decline: Foreign Workers, Husband and Wife...

Metrical Inc

Isn't It Too Much to Expect Instantaneous Screening to Yield the Same Shares as Buffett's Approach?

I would like to discuss the issues on the April 14 Nikkei article, "Follow Buffett's Model and Find 'High-Quality, Undervalued' Japanese Stocks.”

Metrical Inc

If Japan Were Treasure Trove of Value Stocks, Global Investors Would Not Underweight Japanese Stocks

I would like to discuss the issues on the April 12 Nikkei article, "Buffett's divine power is still active in the stock market, and the search for...

Metrical Inc

Managers Should Consider That "TSE's Request" Has Changed the Rules of the Game

I would like to discuss the issues on the April 11 Nikkei article titled "The Reason Why the Stock Prices of "Companies Reluctant to Return...

Metrical Inc