Whys is the TSE calling for change?

For years Japan has struggled to shake off its reputation as a “value trap” – a market where stocks were cheap and will remain so.

Around half of Japan’s listed companies trade below their book value. The TSE has taken an increasingly pro-active stance to combat that, tightening listing criteria for its “prime” section, raising the requisite market cap and free float, and applying more stringent disclosure rules around governance, diversity and sustainability.

The TSE called for better capital efficiency by listed companies in March, but only 20 per cent of companies listed on the “prime” market had disclosed specific measures as of July.

The exchange first launched a Corporate Governance Code in 2015 and its basic principles have near 100 per cent compliance. But some of the exchange’s supplementary requests, such as setting targets for the promotion of women, foreign nationals and mid-career hires to management, have lower adherence, which stood at 73 per cent for “prime” companies as of July 2022.