North American and European institutional investors are optimistic about investing in Japan, following the positive momentum in country’s corporate governance landscape.
The report, titled Investor Sentiment on Japanese Reform, said that confidence is mainly driven by prime minister Shinzo Abe’s ‘Third Arrow’ policies and positive developments since the implementation of Corporate Governance and Stewardship Codes, introduced two years ago.
Survey respondents rated independence of board directors (65%) and return-focused capital policy (60%) as the most important components of the Codes.
In other findings, 60% of the respondents felt negative interest rate environment did not affect their investment stance towards Japan.
Almost all survey respondents (19 of 20) pointed to some improvement in issuer behavior since the introduction of the Codes (adherence to which is voluntary), many investors (45%) indicated that their approach to investing in Japan has not changed.
The report added that survey respondents cited a potential box-ticking mentality (45%) and corporate culture (45%) as the biggest challenges to the adoption and implementation of the Codes.
BNY Mellon vice president of environmental, social and governance (ESG) advisory, depositary receipts Michael O'Brien said: “Japanese issuers can better position themselves to international investors by prioritizing capital efficiency and returns.
“Investors would like greater access to senior management and encourage consistent visibility through attendance at global conferences, company hosted investor events and regular global non-deal roadshows.”