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>Overseas investors tend to invest in companies with large market capitalization and high profitability, resulting in higher stock price valuations. They also tend to avoid investing in listed subsidiaries.</li>
<li>Since companies with over 20% foreign ownership show superior board practices, it’s reasonable to assume that board practices improve as foreign ownership increases and the influence of overseas investors increases.</li>
<li>Companies with more than 30% foreign ownership have many items that generally show excellent values in Key Actions. However, all companies still face challenges in cash allocation.</li>
</ul>


Overseas investors tend to invest in companies with large market capitalization and high profitability, resulting in higher stock price valuations. They also tend to avoid investing in listed subsidiaries.
Since companies with over 20% foreign ownership show superior board practices, it’s reasonable to assume that board practices improve as foreign ownership increases and the influence of overseas investors increases.
Companies with more than 30% foreign ownership have many items that generally show excellent values in Key Actions. However, all companies still face challenges in cash allocation.


Drivers of Corporate Governance Improvement Are the Percentage of Foreign Shareholdings

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

TSE Tokyo Price Index TOPIX / Event-Driven

<ul>
<li>The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.</li>
<li>The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.</li>
<li>If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That's MUCH tougher.</li>
</ul>


The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That's MUCH tougher.


New Year New NISA Accounts - It's BIG, But Not so Big

<ul>
<li>The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to &gt;1.0x. The easiest way to do that is raise ROE.</li>
<li>Raising R requires customers "agree" (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That's easier for a company.</li>
<li>So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.</li>
</ul>


The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to &gt;1.0x. The easiest way to do that is raise ROE.
Raising R requires customers "agree" (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That's easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.


<ul>
<li>In April 2022, after long prep and considerable public comment as to desires and design, the TSE launched its new market segments designed to encourage governance and foreign investment.</li>
<li>At the time, the TSE wanted to showcase Japan's best blue chips. In March, JPX announced JPX Prime 150, designed to make visible</li>
<li>In March 2023, JPX announced JPX Prime 150, to "make visible the leading Japanese companies that are estimated to create value." Ambitious? Yes. Fated to fail? Probably. Badly constructed?  Definitely. </li>
</ul>


In April 2022, after long prep and considerable public comment as to desires and design, the TSE launched its new market segments designed to encourage governance and foreign investment.
At the time, the TSE wanted to showcase Japan's best blue chips. In March, JPX announced JPX Prime 150, designed to make visible
In March 2023, JPX announced JPX Prime 150, to "make visible the leading Japanese companies that are estimated to create value." Ambitious? Yes. Fated to fail? Probably. Badly constructed?  Definitely. 


The TSE's New 'Better' Index:  JPX Prime 150

<ul>
<li>On 8 May I wrote <a href="https://www.smartkarma.com/insights/japan-flow-foreign-investor-inflows-may-increase" target="_blank" data-smartkarma-citation="insights:101617" rel="noopener">JAPAN FLOW: Foreign Investor Inflows May Increase</a>.  Since the data used in that insight, TSE data shows net foreign buying of ¥3.5trln+. </li>
<li>Investor flows appear to work in patterns which are correlated to TOPIX gains and outperformance vs S&amp;P500. </li>
<li>The history of autocorrelation of net buying suggests while the current streak may end, a four week average of net buys could remain positive for a while. </li>
</ul>


On 8 May I wrote JAPAN FLOW: Foreign Investor Inflows May Increase.  Since the data used in that insight, TSE data shows net foreign buying of ¥3.5trln+. 
Investor flows appear to work in patterns which are correlated to TOPIX gains and outperformance vs S&amp;P500. 
The history of autocorrelation of net buying suggests while the current streak may end, a four week average of net buys could remain positive for a while. 


JAPAN FLOW: Foreign Investor Inflows Increased; Next Is Foreigners Vs Buybacks Vs GPIF

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)

Drivers of Corporate Governance Improvement Are the Percentage of Foreign Shareholdings

Based on the % of foreign ownership, I have tried to determine the characteristics of the companies in which overseas investors invest and what...

Metrical Inc

New Year New NISA Accounts - It's BIG, But Not so Big

We will get data shortly showing the January effect of NISA account openings and fundings. So far, the data we can get on a more timely basis...

Travis Lundy

The TSE's New 'Better' Index: JPX Prime 150

The TSE is launching a new JPX Prime 150 Index on 3 July 2023. It is 150 stocks with high PBRs and high "Equity Spread" (ROE vs cost of capital)...

Travis Lundy

JAPAN FLOW: Foreign Investor Inflows Increased; Next Is Foreigners Vs Buybacks Vs GPIF

Foreign Investor Flows in Japan matter. They always matter, and recently, more foreign investor flow has mattered more. History shows there is room...

Travis Lundy

Drivers of Corporate Governance Improvement Are the Percentage of Foreign Shareholdings

Based on the % of foreign ownership, I have tried to determine the characteristics of the companies in which overseas investors invest and what...

Metrical Inc

New Year New NISA Accounts - It's BIG, But Not so Big

We will get data shortly showing the January effect of NISA account openings and fundings. So far, the data we can get on a more timely basis...

Travis Lundy

Share Buybacks In Japan - A 2023 Primer

This is a primer of Share Buybacks - types and processes - in Japan. As the TSE and Govt try to get PBRs up, it is worth understanding how...

Travis Lundy

The TSE's New 'Better' Index: JPX Prime 150

The TSE is launching a new JPX Prime 150 Index on 3 July 2023. It is 150 stocks with high PBRs and high "Equity Spread" (ROE vs cost of capital)...

Travis Lundy

JAPAN FLOW: Foreign Investor Inflows Increased; Next Is Foreigners Vs Buybacks Vs GPIF

Foreign Investor Flows in Japan matter. They always matter, and recently, more foreign investor flow has mattered more. History shows there is room...

Travis Lundy