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>For companies facing challenges in maximizing sustainable shareholder returns, it is not a bad idea to rethink management strategies for corporate value growth in the quiet environment of going private.</li>
<li>MBOs began to attract attention as managers became more aware of the listing costs. TSE's request last March was the product of making companies even more aware of the costs.</li>
<li>It is not easy for a company that has not been recognized in the marketplace for many years to increase its stock valuation in a short period of time.</li>
</ul>


For companies facing challenges in maximizing sustainable shareholder returns, it is not a bad idea to rethink management strategies for corporate value growth in the quiet environment of going private.
MBOs began to attract attention as managers became more aware of the listing costs. TSE's request last March was the product of making companies even more aware of the costs.
It is not easy for a company that has not been recognized in the marketplace for many years to increase its stock valuation in a short period of time.


In Particular, Companies with Small Market Capitalization Should Consider Going Private

<ul>
<li>Many Japanese managers have little idea that what belongs to shareholders is net profit and not free cash flow. This has created two problems.</li>
<li>If Japanese companies, mostly manufacturers, use dividend payout ratios as a criterion for shareholder returns, cash on hand will not decline even if shareholder returns are increased to some extent.</li>
<li>The inability to move beyond the concept of allocating investment and shareholder returns based on increases or decreases in cash may be the reason for the unclear cash allocation policy.</li>
</ul>


Many Japanese managers have little idea that what belongs to shareholders is net profit and not free cash flow. This has created two problems.
If Japanese companies, mostly manufacturers, use dividend payout ratios as a criterion for shareholder returns, cash on hand will not decline even if shareholder returns are increased to some extent.
The inability to move beyond the concept of allocating investment and shareholder returns based on increases or decreases in cash may be the reason for the unclear cash allocation policy.


What Lies Behind the Inability to Come up with Flexible Cash Usage Is

<ul>
<li>Companies with higher foreign shareholdings have superior board practices, suggesting that overseas investor engagement played an important role in improving management that resulted in return on capital.</li>
<li>Clues to changes in management reform can be found in the percentage of independent board members, the percentage of female board members, and policy shareholdings/total assets.</li>
<li>While the substance of the goals is important, the focus has shifted to management's strong will to achieve the goals to raise valuations and return on capital.</li>
</ul>


Companies with higher foreign shareholdings have superior board practices, suggesting that overseas investor engagement played an important role in improving management that resulted in return on capital.
Clues to changes in management reform can be found in the percentage of independent board members, the percentage of female board members, and policy shareholdings/total assets.
While the substance of the goals is important, the focus has shifted to management's strong will to achieve the goals to raise valuations and return on capital.


Content of Disclosures Is Important, but the Focus Has Shifted to Whether the Goals Can Be Achieved

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>The main Japanese indices have been moving sideways this year</li>
<li>Continued weakness in the JPY has diminished returns in USD terms</li>
<li>Technically the market has similar weak underlying breadth as the US market</li>
</ul>


The main Japanese indices have been moving sideways this year
Continued weakness in the JPY has diminished returns in USD terms
Technically the market has similar weak underlying breadth as the US market


Revisiting the Japanese Market – Time to Increase Allocations?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>JPX has commenced a market consultation on changes to the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TSE Tokyo Price Index TOPIX (TPX INDEX)</a> including expansion of the universe and periodic stock selection.</li>
<li>Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TSE Tokyo Price Index TOPIX</a>, though the changes only start in October 2026. </li>
<li>The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier. </li>
</ul>


JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026. 
The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier. 


TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already

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)

In Particular, Companies with Small Market Capitalization Should Consider Going Private

I would like to discuss the issues on the May 24 Nikkei Shimbun article, "Record MBOs: 1.4 Trillion Yen, Market Discipline Prompts Metabolism."

Metrical Inc

What Lies Behind the Inability to Come up with Flexible Cash Usage Is

I would like to discuss the May 18 Nikkei Newspaper article, "No Sanctuary" in Capital Efficiency Reform, Management's Decision in Financial...

Metrical Inc

Content of Disclosures Is Important, but the Focus Has Shifted to Whether the Goals Can Be Achieved

I would like to discuss the issues on the May 17 Nikkei article, "70% of TSE Prime Market Listed Companies (1,100 companies) to Reduce Cross...

Metrical Inc

Revisiting the Japanese Market – Time to Increase Allocations?

Japanese indices have been stagnant due to a weak JPY and share a technically weak underlying breadth as the US market.

Rikki Malik

TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already

JPX has commenced a market consultation that could result in 38 adds and 447 deletions for the index in Oct 2026. There are a lot of high impact...

Brian Freitas

In Particular, Companies with Small Market Capitalization Should Consider Going Private

I would like to discuss the issues on the May 24 Nikkei Shimbun article, "Record MBOs: 1.4 Trillion Yen, Market Discipline Prompts Metabolism."

Metrical Inc

What Lies Behind the Inability to Come up with Flexible Cash Usage Is

I would like to discuss the May 18 Nikkei Newspaper article, "No Sanctuary" in Capital Efficiency Reform, Management's Decision in Financial...

Metrical Inc

Content of Disclosures Is Important, but the Focus Has Shifted to Whether the Goals Can Be Achieved

I would like to discuss the issues on the May 17 Nikkei article, "70% of TSE Prime Market Listed Companies (1,100 companies) to Reduce Cross...

Metrical Inc

Revisiting the Japanese Market – Time to Increase Allocations?

​Japanese indices have been stagnant due to a weak JPY and share a technically weak underlying breadth as the US market.

Rikki Malik

TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already

JPX has commenced a market consultation that could result in 38 adds and 447 deletions for the index in Oct 2026. There are a lot of high impact...

Brian Freitas

Japanese indices have been stagnant due to a weak JPY and share a technically weak underlying breadth as the US market.