Proclamations of a new dawn for Japanese equities have been a regular occurrence over the past decade — destined, repeatedly, to prove premature. Now, a burgeoning bull run appears to be under way. The optimism still needs more fundamental backing.
True, some domestic policy changes have had a positive effect. The government has long pushed for independence on company boards to encourage more attention to shareholder needs. Between 2014 and 2022, the number of Tokyo Stock Exchange constituents with a board boasting a third or more independent directors climbed above 90 per cent from a tiny percentage, note US fund manager GMO. Corporate poison pills have dropped by half.
This means hostile takeovers are more likely. Tokyo now also encourages targeted company boards to show how they could create as much value as any acquirer’s takeover premium, says Peter Tasker at Arcus Investment. Nidec, an acquisitive electric motor maker, had not attempted an unsolicited deal in more than 15 years. But last year, Takasiwa Machine Tool found it could not beat Nidec’s roughly 80 per cent premium.