Eastspring also believes that Tokyo Stock Exchange’s (TSE) reforms are driving credible changes in Japan corporates. “TSE’s corporate governance reforms have already nudged multiple large cap companies to act to improve return on equity. Cross-shareholdings are being unwound, with significant moves in traditionally tightly knit allegiant shareholder relationships in autos, financials and construction value chains,” Eastspring said. “This should further improve boards’ accountability to minority shareholders as well as spur further activist involvement.” 

In summary, Eastspring believes that management teams need to realign the portfolios of conglomerate corporations – i.e. exit non-core businesses and reallocate capital to stronger areas.