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>Dividends are still the mainstay of shareholder returns, but shareholder returns, including share buybacks, became a standard “P/B raising measure,” which is why share buybacks increased on a company-by-company basis.</li>
<li>Share repurchases increased significantly this year as large cross-holding share dissolutions were undertaken through share repurchases. Share buybacks will continue increasing due to share repurchases for dissolution of cross-shareholdings.</li>
<li>Companies that have been reluctant to retire treasury stock are finally moving to do so. This is expected to be a change of the companies.</li>
</ul>


Dividends are still the mainstay of shareholder returns, but shareholder returns, including share buybacks, became a standard “P/B raising measure,” which is why share buybacks increased on a company-by-company basis.
Share repurchases increased significantly this year as large cross-holding share dissolutions were undertaken through share repurchases. Share buybacks will continue increasing due to share repurchases for dissolution of cross-shareholdings.
Companies that have been reluctant to retire treasury stock are finally moving to do so. This is expected to be a change of the companies.


"TSE's Request” and Dissolution of Cross-Shareholdings Are Behind the Increase in Share Repurchases

<ul>
<li>With about 40% of companies having a P/B of less than 1x, the problem is that many disclosures do not understand management to create value and increase the stock price.</li>
<li>It's difficult for investors' voices to reach small cap companies and companies with still high defensive walls of cross-held shares, which are not easily targeted for investment by institutional investors.</li>
<li>Independent directors should be appointed with skillset to participate in developing management plans and scrutinize them for reasonableness and whether the projected corporate value is gapped from that of investors.</li>
</ul>


With about 40% of companies having a P/B of less than 1x, the problem is that many disclosures do not understand management to create value and increase the stock price.
It's difficult for investors' voices to reach small cap companies and companies with still high defensive walls of cross-held shares, which are not easily targeted for investment by institutional investors.
Independent directors should be appointed with skillset to participate in developing management plans and scrutinize them for reasonableness and whether the projected corporate value is gapped from that of investors.


Seeing Disappointing Disclosures Raises Question of What Was the Skill Matrix of Board Directors?

<ul>
<li>There is a need to change the mindset of company managers who consider IPO as a goal and not a way to grow after the listing.</li>
<li>The listing criteria for TSE Growth Market will be raised as early as April 2026. It's clear that the current listing criteria are far from liquid enough to invest in.</li>
<li>For companies that are already listed, some rule should be established to either de-list them because they cannot bear the listing cost or to increase their market capitalization through M&amp;As.</li>
</ul>


There is a need to change the mindset of company managers who consider IPO as a goal and not a way to grow after the listing.
The listing criteria for TSE Growth Market will be raised as early as April 2026. It's clear that the current listing criteria are far from liquid enough to invest in.
For companies that are already listed, some rule should be established to either de-list them because they cannot bear the listing cost or to increase their market capitalization through M&amp;As.


Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed

<ul>
<li>While the number of listed companies worldwide has been on a declining trend, the TSE has experienced growth in market capitalization, but growth in market capitalization has been slow.</li>
<li>TSE requested companies to raise their P/B, but admits that many companies have yet to reach this goal and that it'll take considerable time to change to such management style.</li>
<li>Shareholder proposals are increasing. This could hasten the shift to value-creating management, or companies that find it burdensome as a cost of listing may choose to go private.</li>
</ul>


While the number of listed companies worldwide has been on a declining trend, the TSE has experienced growth in market capitalization, but growth in market capitalization has been slow.
TSE requested companies to raise their P/B, but admits that many companies have yet to reach this goal and that it'll take considerable time to change to such management style.
Shareholder proposals are increasing. This could hasten the shift to value-creating management, or companies that find it burdensome as a cost of listing may choose to go private.


Is the Decline in Number of Listed Companies the Beginning of a Shift to Value-Creating Management?

<ul>
<li>Overseas investors have sold off heavily in Japanese equities since July, and it'll interesting to see the trading trends in January, which will reflect their asset allocation for the year.</li>
<li>Overseas investors buy Japanese equities when they expect the management of Japanese companies to change and improve their profitability and growth potential.</li>
<li>Benchmark investors who have reduced their investment weighting in Japanese equities may return to their investment weighting if they expect a relative improvement in Japanese equity investment performance in 3Q.</li>
</ul>


Overseas investors have sold off heavily in Japanese equities since July, and it'll interesting to see the trading trends in January, which will reflect their asset allocation for the year.
Overseas investors buy Japanese equities when they expect the management of Japanese companies to change and improve their profitability and growth potential.
Benchmark investors who have reduced their investment weighting in Japanese equities may return to their investment weighting if they expect a relative improvement in Japanese equity investment performance in 3Q.


Improved Governance Tends to Raise Reason to Buy Japanese Stocks when Corporate Profit Is Lackluster

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)

Seeing Disappointing Disclosures Raises Question of What Was the Skill Matrix of Board Directors?

I would like to discuss the issues on the December 19 Nikkei Newspaper article, “‘Bad Disclosures’ and Outside Directors.”

Metrical Inc

Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed

I would like to discuss the issues on the December 15 Nikkei Newspaper article, “Emerging, ”Boldly Take on Growth without Aiming to Go Public."

Metrical Inc

Is the Decline in Number of Listed Companies the Beginning of a Shift to Value-Creating Management?

I would like to discuss the December 15 Nikkei Shimbun article, “Delisting of 94 Companies, the Largest Number of Delistings; TSE Companies...

Metrical Inc

Improved Governance Tends to Raise Reason to Buy Japanese Stocks when Corporate Profit Is Lackluster

I would like to discuss the issues on the Nikkei Shimbun article on December 13, “Expectations for Japanese Stocks in 2025.”

Metrical Inc

"TSE's Request” and Dissolution of Cross-Shareholdings Are Behind the Increase in Share Repurchases

I would like to discuss the issues on the December 20 Nikkei Newspaper article, “Share Buybacks to Reach 17 Trillion Yen in 2024; Active...

Metrical Inc

Seeing Disappointing Disclosures Raises Question of What Was the Skill Matrix of Board Directors?

I would like to discuss the issues on the December 19 Nikkei Newspaper article, “‘Bad Disclosures’ and Outside Directors.”

Metrical Inc

Easier to Raise Listing Criteria, but More Difficult to Encourage Growth of Companies Already Listed

I would like to discuss the issues on the December 15 Nikkei Newspaper article, “Emerging, ”Boldly Take on Growth without Aiming to Go Public."

Metrical Inc

Is the Decline in Number of Listed Companies the Beginning of a Shift to Value-Creating Management?

I would like to discuss the December 15 Nikkei Shimbun article, “Delisting of 94 Companies, the Largest Number of Delistings; TSE Companies...

Metrical Inc

Improved Governance Tends to Raise Reason to Buy Japanese Stocks when Corporate Profit Is Lackluster

I would like to discuss the issues on the Nikkei Shimbun article on December 13, “Expectations for Japanese Stocks in 2025.”

Metrical Inc