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>While economic prosperity is necessary, the issue isn't that couples have very few children; rather, children cannot be born without marriage, and rising rate of unmarried people is the problem.</li>
<li>Policies should consider the fact that the declining birth rate is linked to the growing number of people who choose not to marry and those who desire diverse lifestyles.</li>
<li>Regarding the issue of the birth rate, social reforms are needed to ensure that the burden of household chores is not disproportionately placed on women.</li>
</ul>


While economic prosperity is necessary, the issue isn't that couples have very few children; rather, children cannot be born without marriage, and rising rate of unmarried people is the problem.
Policies should consider the fact that the declining birth rate is linked to the growing number of people who choose not to marry and those who desire diverse lifestyles.
Regarding the issue of the birth rate, social reforms are needed to ensure that the burden of household chores is not disproportionately placed on women.


A System Established More than 150 Years Ago Is Holding Back Progress Toward Diversity

<ul>
<li>Given the high level of cash on hand, the company could have conducted more share buybacks, and these should increase going forward.</li>
<li>While more companies are announcing enhanced shareholder returns, cash reserves remains high and ROE is stagnating. In short, many companies are still not doing what they could be doing.</li>
<li>Large-Scale share buybacks aimed at resolving cross-shareholdings are an effective measure for improving return on equity. Once these large-scale buybacks subside, there is concern that smaller, incremental buybacks will increase.</li>
</ul>


Given the high level of cash on hand, the company could have conducted more share buybacks, and these should increase going forward.
While more companies are announcing enhanced shareholder returns, cash reserves remains high and ROE is stagnating. In short, many companies are still not doing what they could be doing.
Large-Scale share buybacks aimed at resolving cross-shareholdings are an effective measure for improving return on equity. Once these large-scale buybacks subside, there is concern that smaller, incremental buybacks will increase.


Three Years On, the Management's Commitment Is Being Put to the Test

<ul>
<li>As the influence of foreign investors grows, we believe that listed companies can increase their base of individual shareholders by lowering the minimum investment unit and reinstating shareholder benefit programs.</li>
<li>The increase in the number of listed companies actually implementing stock splits to lower their minimum trading units was triggered by a “request from the Tokyo Stock Exchange” in 2023.</li>
<li>Companies that understand well present measures to increase individual shareholders as a response to TSE’s request to boost stock prices, but their actual goal is to secure the poxy voting.</li>
</ul>


As the influence of foreign investors grows, we believe that listed companies can increase their base of individual shareholders by lowering the minimum investment unit and reinstating shareholder benefit programs.
The increase in the number of listed companies actually implementing stock splits to lower their minimum trading units was triggered by a “request from the Tokyo Stock Exchange” in 2023.
Companies that understand well present measures to increase individual shareholders as a response to TSE’s request to boost stock prices, but their actual goal is to secure the poxy voting.


Is the Real Purpose Behind the Increasing Number of Stock Splits to Secure Proxy Voting?

<ul>
<li>Similar to last year, the percentage of companies holding AGM over four days—the last Tuesday, Wednesday, Thursday, and Friday of June—rose from 79.9% last year to 81.0%, marking further increase.</li>
<li>Currently, few companies disclose annual securities reports three weeks prior to AGM; all documents should be translated into English in notices of meeting, but only 30% of companies do so.</li>
<li>An increasing number of companies are holding AGMs that allow only in-person attendance. The number of AGMs that permit online questions and voting has not increased.</li>
</ul>


Similar to last year, the percentage of companies holding AGM over four days—the last Tuesday, Wednesday, Thursday, and Friday of June—rose from 79.9% last year to 81.0%, marking further increase.
Currently, few companies disclose annual securities reports three weeks prior to AGM; all documents should be translated into English in notices of meeting, but only 30% of companies do so.
An increasing number of companies are holding AGMs that allow only in-person attendance. The number of AGMs that permit online questions and voting has not increased.


Is the Formalization of Disclosures Regarding AGMs Underway?

<ul>
<li>Amid the current heated debate over using cash for growth investments, discussions seem to be moving towards forcing companies to use cash, even if accounting standards had to be changed.</li>
<li>The current challenge facing Japanese companies is that their growth potential and return on capital fall short of expectations. Changing accounting standards will not solve these issues.</li>
<li>If TSE were to unify its accounting standards with IFRS, that wouldn’t necessarily be a bad idea. However, growth and profitability cannot be masked by changes to accounting standards.</li>
</ul>


Amid the current heated debate over using cash for growth investments, discussions seem to be moving towards forcing companies to use cash, even if accounting standards had to be changed.
The current challenge facing Japanese companies is that their growth potential and return on capital fall short of expectations. Changing accounting standards will not solve these issues.
If TSE were to unify its accounting standards with IFRS, that wouldn’t necessarily be a bad idea. However, growth and profitability cannot be masked by changes to accounting standards.


Can Japanese Companies Recover What They’ve Lost over 40 Years? Accounting Standard Revision Debate

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)

A System Established More than 150 Years Ago Is Holding Back Progress Toward Diversity

I would like to discuss the issues on the Nikkei article published on May 8 titled “Will a ‘Single Tax’ Revive the Birth Rate?”

Metrical Inc

Three Years On, the Management's Commitment Is Being Put to the Test

I would like to discuss the issues on the May 7 Nikkei article titled “Share Buybacks Reach Record High of 22 Trillion Yen, Marking Fifth...

Metrical Inc

Is the Real Purpose Behind the Increasing Number of Stock Splits to Secure Proxy Voting?

I would like to discuss the May 6 Nikkei article titled “Lower Barriers to Stock Investment: Minimum Investment Amounts and Stock Splits Bring...

Metrical Inc

Is the Formalization of Disclosures Regarding AGMs Underway?

I would like to discuss the document published by TSE “Trends in Annual General Meetings of Shareholders for Companies Reporting Financial Results...

Metrical Inc

Can Japanese Companies Recover What They’ve Lost over 40 Years? Accounting Standard Revision Debate

I would like to discuss the issues on the April 25 Nikkei article titled “Debate on ‘Goodwill’ Accounting Must Face Reality: Make IFRS a...

Metrical Inc