Hugh Wheelan: Can Japan join the dots between long-term investing and better corporate profit?

Today (May 20) is the closing date for comments on a fascinating examination of whether better relationships between companies and investors can lead to long-term sustainable growth in Japan under the country’s Abenomics programme. Even for organizations not commenting on the report, the executive summary merits a close read because it attempts to make the connection between long-term investment, strong investor-company engagement/reporting and Japan’s corporate problem: low return on equity due to poor profitability. It is an important contribution to the debate around the financial markets applicability and social benefit of institutional long-termism for investors, companies and the economy, which is regularly held up as a ‘goal’ by governments with little indication of how to get there. As was discussed at our recent RI Asia 2014 conference in Tokyo, Japan, the review has been carried out by Japan’s Ministry of Economy, Trade and Industry (METI), and is called the “Ito Review” of the “Competitiveness and Incentives for Sustainable Growth: Building Favorable Relationships between Companies and Investors”, after Dr. Kunio Ito, professor, Graduate School of Commerce and Management, Hitotsubashi University, who leads the project.It’s been compared to the UK’s Kay review of UK equity markets and long-term decision making, and I think it could have the same slow-burn effect. The Ito Review’s remit is to enhance the competitiveness of Japanese companies, support their sustainable growth, and consider new favourable capital markets that would support such growth. METI has been keen to solicit evidence and information from companies, investors and stakeholders outside of Japan as well as inside. The interim report is a synthesis of the responses so far alongside an initial review by the members of the Ito Review committee. METI is scheduling further discussions based on the interim report and the final call for further information and opinions. A final report is scheduled for early June. I think it’s well worth 15 minutes of your time. Final comments on the review should be sent to: itoreview@meti.go.jp
Both the Executive Summary and the full report can be linked to here

Link to the RI Asia 2014 conference report