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>Of course, it's desirable to be able to use cash to find effective investments, but it is important to return cash on hand with an immediate impact on ROE improvement.</li>
<li>Looking at all listed companies, there are a great many companies that have a large amount of cash on hand relative to sales.</li>
<li>Denso's measures to reduce policy shareholdings plus share buybacks will directly improve ROE, even if the background was a desire to stem the rise in foreign shareholdings.</li>
</ul>


Of course, it's desirable to be able to use cash to find effective investments, but it is important to return cash on hand with an immediate impact on ROE improvement.
Looking at all listed companies, there are a great many companies that have a large amount of cash on hand relative to sales.
Denso's measures to reduce policy shareholdings plus share buybacks will directly improve ROE, even if the background was a desire to stem the rise in foreign shareholdings.


There Are Still Very Many Companies with High Cash on Hand Relative to Sales

Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>
<a href="https://www.smartkarma.com/entities/japan-business-systems-inc" target="_blank" data-smartkarma-citation="entities:40379:1" rel="noopener">Japan Business Systems (5036 JP)</a> and <a href="https://www.smartkarma.com/entities/orion-breweries-ltd" target="_blank" data-smartkarma-citation="entities:45701:1" rel="noopener">Orion Breweries (409A JP)</a> were included in the TOPIX index at the end of October 2025. </li>
<li>
<a href="https://www.smartkarma.com/entities/japan-eyewear-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:40217:1" rel="noopener">Japan Eyewear Holdings (5889 JP)</a>, <a href="https://www.smartkarma.com/entities/fit-easy-inc" target="_blank" data-smartkarma-citation="entities:45319:1" rel="noopener">FIT EASY (212A JP)</a>, and <a href="https://www.smartkarma.com/entities/tekscend-photomask-corp" target="_blank" data-smartkarma-citation="entities:45819:1" rel="noopener">Tekscend Photomask (429A JP)</a> will be included in the TOPIX index at the end of November 2025.</li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.

Japan Business Systems (5036 JP) and Orion Breweries (409A JP) were included in the TOPIX index at the end of October 2025. 

Japan Eyewear Holdings (5889 JP), FIT EASY (212A JP), and Tekscend Photomask (429A JP) will be included in the TOPIX index at the end of November 2025.


TOPIX Inclusions: Who Is Ready (Nov 2025)

<ul>
<li>The actual ratio of tradable shares, excluding ETFs held by BoJ, is low, as a result, the number of Japanese equities available for investment by large institutional investors is limited.</li>
<li>ETFs owned by BoJ may be treated as being in favor of company-proposed proposals and against shareholder-proposed proposals, thus BOJ-owned ETFs are hindering the improvement of corporate governance.</li>
<li>It is good that BoJ has begun to consider an exit from ETFs, but with several variables and unknowns, it is not easy for investors to predict the timing.</li>
</ul>


The actual ratio of tradable shares, excluding ETFs held by BoJ, is low, as a result, the number of Japanese equities available for investment by large institutional investors is limited.
ETFs owned by BoJ may be treated as being in favor of company-proposed proposals and against shareholder-proposed proposals, thus BOJ-owned ETFs are hindering the improvement of corporate governance.
It is good that BoJ has begun to consider an exit from ETFs, but with several variables and unknowns, it is not easy for investors to predict the timing.


Will the Timing of the BOJ ETF Exit Be Revealed in December?

<ul>
<li>In addition to many manufacturing companies that are sensitive to economic cycles, TSE is also characterized by many companies with sluggish operating cash flow growth.</li>
<li>Low interest rates in Japan can also be a factor in high volatility. As the volatility of low interest rates increases, corporate value volatility is likely to increase as well.</li>
<li>Some overseas investors pay attention to the equity spread over JGB yields. As the risk of rising interest rates in Japan increases, they are likely to unwind their futures positions.</li>
</ul>


In addition to many manufacturing companies that are sensitive to economic cycles, TSE is also characterized by many companies with sluggish operating cash flow growth.
Low interest rates in Japan can also be a factor in high volatility. As the volatility of low interest rates increases, corporate value volatility is likely to increase as well.
Some overseas investors pay attention to the equity spread over JGB yields. As the risk of rising interest rates in Japan increases, they are likely to unwind their futures positions.


Is the High Volatility of Japanese Equities Only Due to Their Small Market Capitalization?

<ul>
<li>Operating income and depreciation, the components of operating cash flow, have been sluggish. This has undeniably dampened expectations for expanding corporate value.</li>
<li>Many companies have begun to be aware of cash flow, but have yet to see results. They are at the stage of producing results by selecting business to invest cash.</li>
<li>In terms of “not being conscious of cash flow,” shareholder returns are still strongly net income oriented and not cash flow oriented.</li>
</ul>


Operating income and depreciation, the components of operating cash flow, have been sluggish. This has undeniably dampened expectations for expanding corporate value.
Many companies have begun to be aware of cash flow, but have yet to see results. They are at the stage of producing results by selecting business to invest cash.
In terms of “not being conscious of cash flow,” shareholder returns are still strongly net income oriented and not cash flow oriented.


Companies Have Begun to Be Aware of Cash Flow, but the Reality Is that It Doesn't Produce Results

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)

There Are Still Very Many Companies with High Cash on Hand Relative to Sales

I would like to discuss the issues on the article in the Nikkei Shimbun on November 25, “Aoyama Shoji and Denso Increase Shareholder Returns...

Metrical Inc

TOPIX Inclusions: Who Is Ready (Nov 2025)

There are currently 140 names that satisfy all 5 key Segment Transfer requirements based on current data. Another 137 names can satisfy 4 out of 5...

Janaghan Jeyakumar, CFA

Will the Timing of the BOJ ETF Exit Be Revealed in December?

I would like to discuss the issues on the November 24 Nikkei article, “Is it realistic for the Bank of Japan to start selling ETFs on a small scale...

Metrical Inc

Is the High Volatility of Japanese Equities Only Due to Their Small Market Capitalization?

I would like to discuss the issues on the Nikkei Shimbun article of November 17, “Why Japanese Stocks Repeatedly Volatile.”

Metrical Inc

Companies Have Begun to Be Aware of Cash Flow, but the Reality Is that It Doesn't Produce Results

I would like to discuss the issues on the November 22 article in the Nikkei Shimbun titled “Japanese Companies Focus Less on Cash Flow than US and...

Metrical Inc