Only a third of Japanese firms are truly disclosing business plans as directed by Tokyo bourse: Nippon Life Insurance

LESS than a third of domestic companies that have complied with the directive from the Tokyo Stock Exchange (TSE) to disclose their business improvement plans have actually provided detailed strategies, major institutional investor Nippon Life Insurance has said.

The TSE’s name-and-shame campaign, launched last year and aimed at encouraging Japanese companies into paying more attention to shareholders, is a pillar on which many strategists had based their bullish calls on the nation’s equities. 

About 79 per cent of Japanese companies listed on the exchange’s prime section or the main board, had responded to the bourse’s request as of August, the TSE’s database indicated.

But Nippon Life, which has invested in 795 prime market-listed firms that have disclosed such business improvement plans, said only 29 per cent of the companies in that group had elaborated on their individual blueprints.

“The rest of companies were just talking with enthusiasm or didn’t have satisfactory disclosures,” said Tomochika Ishii, general manager of the equity investment department at Nippon Life, which is popularly referred to as Nissay.

“There are companies that haven’t made much disclosures about how they plan to manage their balance sheets,” he noted when the insurer released its annual report outlining its stewardship activities. 

Despite the TSE’s campaign, the return on equity of Tokyo Stock Price Index companies has remained about 8 per cent, staying below those of its peers, showed data compiled by Bloomberg.

Hopes that Japanese companies may manage their capital better have propelled Japanese stock prices to rise above their 1989 peak earlier this year.

But since then, the market has lost momentum amid worries about the Bank of Japan’s plan to tighten monetary policy and an economic slowdown in the US.

Still, Nippon Life – Japan’s largest insurer with total assets of 83.5 trillion yen (S$762.3 billion) – credited the TSE’s programme with helping raise awareness among Japanese companies about the need to allocate capital more efficiently.

“The TSE’s initiative has had a big impact in changing companies’ mindsets,” Ishii said. “The next step is to make it real, and that’s where investors like us have a role to play.” BLOOMBERG