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 is likely to raise the current Growth Market listing criteria of at least 500 million yen in tradable equity market capitalization, probably starting in April 2026.</li>
<li>Since listing examinations are already being conducted with the new criteria in mind, IPO reserves are being prepared with a larger market capitalization than before.</li>
<li>It is unclear how much will be raised, but companies will prepare for listing by increasing its market capitalization through the use of the secondary market and M&amp;A.</li>
</ul>


TSE is likely to raise the current Growth Market listing criteria of at least 500 million yen in tradable equity market capitalization, probably starting in April 2026.
Since listing examinations are already being conducted with the new criteria in mind, IPO reserves are being prepared with a larger market capitalization than before.
It is unclear how much will be raised, but companies will prepare for listing by increasing its market capitalization through the use of the secondary market and M&amp;A.


Listing Criteria for the TSE Growth Market Is Expected to Be Raised Starting April 2026

<ul>
<li>The previous share price of FUJISOFT did not reach the value it should have, and therefore, the company did not achieve its management goal of maximizing shareholder profit.</li>
<li>The decision for shareholder return or investment in growth rests with management. Cash returned to shareholders is simply invested by investors to find investments where they can earn better investment.</li>
<li>Rather than “shareholder pressure,” we should think this is the beginning of an effort to return to the basics of shareholder-oriented management, which is to expand shareholder interests.</li>
</ul>


The previous share price of FUJISOFT did not reach the value it should have, and therefore, the company did not achieve its management goal of maximizing shareholder profit.
The decision for shareholder return or investment in growth rests with management. Cash returned to shareholders is simply invested by investors to find investments where they can earn better investment.
Rather than “shareholder pressure,” we should think this is the beginning of an effort to return to the basics of shareholder-oriented management, which is to expand shareholder interests.


Going Private Is Not an “exit” from the Market, but the Beginning of the Next Step

<ul>
<li>There do not seem to be many companies that have executed large one-time dividends that have subsequently grown in corporate value.</li>
<li>Now that the exit from deflationary economy is seen and profit margins have room to grow, the environment is conducive to investing in growth, and companies have opportunities to change.</li>
<li>Limited profit growth is making it easier for market risk-taking investors to leave. Unless companies can grow profitably, Tokyo market will be full of private equity funds and activist investors.</li>
</ul>


There do not seem to be many companies that have executed large one-time dividends that have subsequently grown in corporate value.
Now that the exit from deflationary economy is seen and profit margins have room to grow, the environment is conducive to investing in growth, and companies have opportunities to change.
Limited profit growth is making it easier for market risk-taking investors to leave. Unless companies can grow profitably, Tokyo market will be full of private equity funds and activist investors.


If Profits Cannot Grow, Tokyo Market Will Be Full of PE and Activist Investors

<ul>
<li>Because the majority of companies are still unable to change themselves, both the government and the TSE have taken measures to expect engagement from institutional investors, including activist investors.</li>
<li>Japan has high barriers in areas that aren't regulated by law. The existence of cross-shareholdings has allowed managers to continue to operate without respect for the interests of minority shareholders.</li>
<li>It is premature to raise the requirements for shareholder proposals and requests to call special meetings to the level of other countries when many companies are still protected by cross-shareholdings.</li>
</ul>


Because the majority of companies are still unable to change themselves, both the government and the TSE have taken measures to expect engagement from institutional investors, including activist investors.
Japan has high barriers in areas that aren't regulated by law. The existence of cross-shareholdings has allowed managers to continue to operate without respect for the interests of minority shareholders.
It is premature to raise the requirements for shareholder proposals and requests to call special meetings to the level of other countries when many companies are still protected by cross-shareholdings.


Raising Requirements for Shareholder Proposals Could Hinder the Shift to Value-Creating Management

<ul>
<li>The improvement in ROA was not as large as that of ROE, which raises concerns that the improvement in profitability may be running out of steam.</li>
<li>Improvements in corporate governance in 2024 were even lower than in 2023. The repetitive loss of enthusiasm after danger past is seen in % Independent Directors, Nomination/Compensation Committee, etc.</li>
<li>The reason why stock valuations little increased despite Foreign Ownership's 2024 increase might have to do with the fact that improvements in corporate governance have not spread to all companies.</li>
</ul>


The improvement in ROA was not as large as that of ROE, which raises concerns that the improvement in profitability may be running out of steam.
Improvements in corporate governance in 2024 were even lower than in 2023. The repetitive loss of enthusiasm after danger past is seen in % Independent Directors, Nomination/Compensation Committee, etc.
The reason why stock valuations little increased despite Foreign Ownership's 2024 increase might have to do with the fact that improvements in corporate governance have not spread to all companies.


"Danger Past, God Forgotten" How Long Will the Effect of TSE's Request Last?

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)

Listing Criteria for the TSE Growth Market Is Expected to Be Raised Starting April 2026

I would like to discuss the issues on the December 9 Nikkei Shimbun article, Newly Listed Companies: ‘No Rush to Public Listing’ Approaching 50%...

Metrical Inc

Going Private Is Not an “exit” from the Market, but the Beginning of the Next Step

I would like to discuss the issues on the December 4 Nikkei article, “Unwanted Going Private Expands as Companies Lose Management Autonomy."

Metrical Inc

If Profits Cannot Grow, Tokyo Market Will Be Full of PE and Activist Investors

I would like to discuss the issues on the December 2 Nikkei article “Activist Investors Attacking Companies Losing Their ‘Yoroi’ (armor), Targeting...

Metrical Inc

Raising Requirements for Shareholder Proposals Could Hinder the Shift to Value-Creating Management

I would like to discuss the issues on the December 3 Nikkei Shimbun article, “Japan finds itself in ‘fund heaven’ as the government intensifies...

Metrical Inc

"Danger Past, God Forgotten" How Long Will the Effect of TSE's Request Last?

I would like to discuss how far listed companies have progressed in their corporate governance efforts during the year 2024, based on my 2 previous...

Metrical Inc