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>TSE plans to revise the listing maintenance criteria for its Growth Market to “market capitalization of over 10 billion yen within 5 years of listing,” with announcement scheduled for December.</li>
<li>The problem lies not with companies listing on the growth market itself, but with the increasing number of non-growing companies listing on the growth market.</li>
<li>Few companies exit the market, not just the growth market, which is why many companies lack growth mindset. Revising listing maintenance standards may slightly increase the number of companies exiting.</li>
</ul>


TSE plans to revise the listing maintenance criteria for its Growth Market to “market capitalization of over 10 billion yen within 5 years of listing,” with announcement scheduled for December.
The problem lies not with companies listing on the growth market itself, but with the increasing number of non-growing companies listing on the growth market.
Few companies exit the market, not just the growth market, which is why many companies lack growth mindset. Revising listing maintenance standards may slightly increase the number of companies exiting.


To Improve the Quality of Listed Companies, Every Effort to Promote Going Private Is Necessary

<ul>
<li>Of foreign shareholding in 30% range, 1% is held by activist funds. Meanwhile, the cross-shareholding is around 10%, and ETFs held by BoJ account for 7% of TSE market capitalization.</li>
<li>Passing shareholder proposals remains difficult, as conditions must align: a company must have fairly high foreign ownership, and its conduct must be bad that domestic institutions can endorse the proposal.</li>
<li>Claiming that “shareholder proposals from activist investors often target short-term profit-seeking initiatives” merely serves as a comforting excuse for executives who are postponing management challenges.</li>
</ul>


Of foreign shareholding in 30% range, 1% is held by activist funds. Meanwhile, the cross-shareholding is around 10%, and ETFs held by BoJ account for 7% of TSE market capitalization.
Passing shareholder proposals remains difficult, as conditions must align: a company must have fairly high foreign ownership, and its conduct must be bad that domestic institutions can endorse the proposal.
Claiming that “shareholder proposals from activist investors often target short-term profit-seeking initiatives” merely serves as a comforting excuse for executives who are postponing management challenges.


Criticism of Shareholder Proposals from Activist Investors Is a Comforting Word for Management

<ul>
<li>The P/B ratio, which rose alongside the stock price increase, climbed to 1.4 in October 2025, but this merely matched the level seen from February 2024 to May 2024.</li>
<li>Despite stagnant actual EPS, BPS and ROE, rising stock prices pull up P/E and P/B. Correlation with P/B suggests that appealing to expectations of stock prices—over actual numbers—is more effective.</li>
<li>Whether current valuations are reasonable or if there is further upside potential depends on changes in future expectations and how these are factored into actual results.</li>
</ul>


The P/B ratio, which rose alongside the stock price increase, climbed to 1.4 in October 2025, but this merely matched the level seen from February 2024 to May 2024.
Despite stagnant actual EPS, BPS and ROE, rising stock prices pull up P/E and P/B. Correlation with P/B suggests that appealing to expectations of stock prices—over actual numbers—is more effective.
Whether current valuations are reasonable or if there is further upside potential depends on changes in future expectations and how these are factored into actual results.


Stock Prices Driven by Expectations Require Support from Actual Corporate Performance

<ul>
<li>For years, overseas investors have raised concerns about management's lack of awareness regarding fiduciary duty to fulfill corporate value growth and shareholder returns, which are integral to maximizing shareholder interest.</li>
<li>While the weak yen has certainly increased the “foreign currency translation adjustment” and impacted ROE, it has also had a positive effect on profits.</li>
<li>Among the three components of ROE, Net Profit Margin showed the highest correlation. There is a problem with accumulating cash on the balance sheet without investing to improve profit margins.</li>
</ul>


For years, overseas investors have raised concerns about management's lack of awareness regarding fiduciary duty to fulfill corporate value growth and shareholder returns, which are integral to maximizing shareholder interest.
While the weak yen has certainly increased the “foreign currency translation adjustment” and impacted ROE, it has also had a positive effect on profits.
Among the three components of ROE, Net Profit Margin showed the highest correlation. There is a problem with accumulating cash on the balance sheet without investing to improve profit margins.


Who Benefits from Hoarding Cash Without Implementing Measures to Boost Profit Margins?

<ul>
<li>Share buybacks peak every year in June when AGMs are held, after which the “Quiet Period” begins. Toward the fiscal year-end, buybacks are expected as a means to resolve cross-shareholdings.</li>
<li>Given that the capital profitability of all TSE-listed companies hasn't shown improvement, investors must continue to call for reducing excess cash reserves through dissolution of cross-shareholdings and the share buybacks.</li>
<li>Shareholders entrust management with the responsibility to maximize shareholder interest, which includes shareholder returns and corporate value growth. It's natural for shareholders to demand that management fulfill this fiduciary duty.</li>
</ul>


Share buybacks peak every year in June when AGMs are held, after which the “Quiet Period” begins. Toward the fiscal year-end, buybacks are expected as a means to resolve cross-shareholdings.
Given that the capital profitability of all TSE-listed companies hasn't shown improvement, investors must continue to call for reducing excess cash reserves through dissolution of cross-shareholdings and the share buybacks.
Shareholders entrust management with the responsibility to maximize shareholder interest, which includes shareholder returns and corporate value growth. It's natural for shareholders to demand that management fulfill this fiduciary duty.


The Game Has Changed Since the Era of Cross-Shareholdings

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 Improve the Quality of Listed Companies, Every Effort to Promote Going Private Is Necessary

I would like to discuss the issues on the TSE's disclosure materials dated November 13 titled “Future Measures for the Growth Market.”

Metrical Inc

Criticism of Shareholder Proposals from Activist Investors Is a Comforting Word for Management

I would like to discuss the issues on the November 13 Nikkei article titled “Japan Is an Activist Heaven: Hedge Fund Returns 1.7 Times the Global...

Metrical Inc

Stock Prices Driven by Expectations Require Support from Actual Corporate Performance

I would like to discuss the issues on the key points of the Nikkei newspaper article dated November 9th, titled “The Full-Scale Arrival of the...

Metrical Inc

Who Benefits from Hoarding Cash Without Implementing Measures to Boost Profit Margins?

I would like to discuss the issues on the Nikkei newspaper article “Considering the Denominator of ROE” published on November 7.

Metrical Inc

The Game Has Changed Since the Era of Cross-Shareholdings

I would like to discuss the issues on the Nikkei article dated November 5th titled “Dividends, Share Buybacks, and Growth: All Wanted—High Bar for...

Metrical Inc