Neuberger Berman explores Japan’s corporate governance reforms and their impact on capital efficiency and shareholder returns. It highlights rising buybacks and ROE improvement while arguing entrenched cash hoarding and cultural inertia still limit full value realization. The paper suggests markets may be underpricing this shift.
Japan’s Coming Wave of Reform
Neuberger Berman
Kei Okamura
Research
16 Pages
Key Takeaways
ROE Re-Rating Trend: Corporate ROE improved from ~5% pre-2012 to ~9% recently, still below global averages near 14%, implying a multi-year normalization opportunity if reforms continue.
Excess Cash Drag: Japanese firms hold cash near 50% of GDP, with cash often exceeding 30% of market cap, weighing on returns despite increased capital return activity.
Buyback Acceleration: Share repurchases have more than doubled since 2013, with annual activity surpassing ¥7 trillion, reflecting increasing pressure from governance codes and activist influence.
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