Japan’s Council of Experts Concerning the Corporate Governance Code, headed by the Financial Services Agency (FSA) and Tokyo Stock Exchange (TSE) comprising a joint secretariat, has finalized its draft of Japan’s first Corporate Governance Code.  Among other things, the current draft encourages stock-based compensation, one-third independent directors, committee board structures, and asks companies to explain the economic rationale behind cross-shareholdings.
Overview: English
Draft code: English | Japanese

More than 175 Japanese and foreign institutional investors have pledged to dictate their proxy votes with the goal of enhancing medium- and long-term investment return by improving corporate value.
List of institutional investors signed up to “Japan’s Stewardship Code”: English
Link to document: English

The final report of a commission led by Tokyo University Professor Takatoshi Ito, advising the Government Pension Fund, recommends that Japanese firms target earning at least an 8% ROE.  The report explains that: “A longer-term issue confronting Japan is how it will maintain and grow its national wealth given its shrinking population.  This issue can only be solved by companies enhancing their earning power and delivering sustained value creation, which will drive returns on long-term investments and result in the overall optimization of the economy’s ‘investment chain.’”
Report: English

The “Japan Revitalization Strategy,” commonly known as the third arrow of the “Abenomics,” places a high priority on the enhancement of corporate governance of Japanese companies.
Link to Document: English

Institutional Shareholder Services—advisor to 90% of institutional investors—made several changes to its voting guidelines in 2015.  Among them, ISS announced that it would recommend voting against corporate management at Japanese companies with average ROE below 5% over the past five years.
Link to document: English

To be included in the index, companies need to rank in the top 400 on the Tokyo Stock Exchange according to ROE (accounting for 40% of the ranking), operating profit (also 40%) and market cap (20%). Japan’s Government Pension Investment Fund increases its allocation to Japanese stocks to 25% and benchmarked itself to the new index, moving away from the Nikkei 225.
Link to: JPX-Nikkei Index 400

Investment Principles that the Investment Advisory Committee of Government Pension Investment Fund (“GPIF”) has established. These principles reflect their commitment to the public, and the Committee members, executives, and staff are committed to acting with the highest professional ethics and integrity. The GPIF is committed to further strengthening investment management, continuing to be fully accountable, and earning the trust of the public.
Link to document: English

The Ministry of Economy, Trade and Industry (METI) has formed the Working Group on forum of investors (WGFoI), which aims to develop a platform where institutional investors can engage in frank discussions on topics including engagement with companies.  The forum of investors itself would consider conducting engagement with companies and making public the agenda and the summary of such engagements.

Written by Dr. Ryohei Yanagi who was one of the member writers for the Ito Review. Currently only in Japanese.
Link to book: Amazon