Building On Corporate Governance Reforms In Japan’s Financial Services Industry


Monday, June 10, 2019    /   08:19AM   /   By Japan FSA 


Being the closing remarks By Mr. Toshihide Endo, Commissioner, Japan's Financial Services Agency, at the G20/OECD Seminar On Corporate Governance, June 8th, 2019.


Thank you very much for the fruitful discussion. I heard a number of inspiring ideas in the two sessions.  


In Session   1, national regulators and international bodies shared their experiences and   achievements based on the 2015   G20 / OECD   Corporate Governance Principles. These  inputs  will  be  a  great  reference  source  for  policymakers  to  enhance  corporate  governance,  even  though  there  are  regional and country differences in market structure and economic environment.  


As Minister Aso and Mr. Inoue noted, corporate governance reform in Japan has achieved remarkable results.  Within just five (5) years, we have seen significant changes in company behaviour.   However, we are not content with these results. We are continuing our reforms, focusing on substantive issues.  These include ensuring that the quality of decision-making continues to get better, and that improved communication between investors and management leads to an exchange of new ideas and approaches, as well as better outcomes for Japanese companies. Enhanced disclosure, including of non-financial information, would help facilitate constructive dialogue between investors and companies. 


We have made some progress in encouraging companies, in particular their senior  executives, to actively  disclose management direction and strategy.  We  are  also  considering further  revisions  to  our  stewardship  code,  and  look  forward  to  deepening  our reforms based on the ideas shared by today’s speakers.


In addition to our work here at home, Japan is also promoting the global dissemination of good governance practices. 


These efforts are focused on Asia and are in cooperation with the OECD. The Asian Roundtable, co-hosted annually with the OECD, is agreat opportunityto bringtogether government officials, academia and practitioners to build a network for sharing experiences, knowledge and bestpractices on corporate governance. 


We  are  also  carrying  out  projects bilaterally  in  Myanmar  and  other  countries,  to  help  them  establish  corporate governance frameworks suited to their local conditions. We are determined to keep helping enhance corporate governance in Asia through these projects.

Improved corporate governance in emerging economies is in fact good for all countries.


For emerging countries, it increases their access to global capital.  For developed countries, it expands the number of investment opportunities in fast-growing markets.


In the end, this leads to a more efficient global allocation of resources, and a wider societal sharing of the benefits.      


In Session 2, we had an insightful discussion on the challenges we face given structural changes in capital markets.


Global  markets  have  evolved  markedly  over  the  last  decade,  as  shown  in  the -ups set an  IPO as their business goal. More recently, the number of listed companies has declined in some advanced economies, with many start-ups now looking to be acquired rather than choosing to go-it-alone in an IPO.


Equity markets provide societal benefits by making abroad range of public companies available to investors, including households, who can benefit from growth. So we have to ask ourselves the question can public markets continue to be attractive enough for both companies and global investors? 


What can we do to achieve this?  This  session  underscored  the  common  issues  that  we will  need  to  consider  now,  and  into  the  future,  as  well  as  new  insights  to  help address them.


Another important change has been the shift from active to passive investment strategies.  Asset managers, once competed for investor funds for higher alpha.


However, as it has recently become more difficult for them to earn excess returns from active investment strategies, the preference of institutional investors has shifted towards passive management. Accelerated by the growing presence of such investors,  passive  investment  is  now  said  to  account  for  the vast majority of managed funds.


Asset managers of passive investments are expected to keep fees low while not having the option to exit specific assets.  This means that they have stronger incentives to promote the longer-term growth of the companies they invest in. This highlights the value of promoting engagement between investors and companies.


While  this  approach  may  sound  simple,  it  is  an  important  and  practical  way  for asset managers to deepen knowledge of the investee firms, and to exercise voting rights in ways that will lead to long term corporate growth.


Now more than ever, we are likely to face common challenges in corporate governance,  given the highly integrated nature of global markets.  It will be only more important that we share our experiences and our understanding of the issues, and promote collaboration of the kind we saw today. Thank you very much. 



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Related to G20/OECD Principles of Corporate Governance

1.     G20/OECD Principles of Corporate Governance - - Jul 08, 2015

2.     G20/OECD publishes revised Principles of Corporate Governance -  Sept 18, 2015

3.      The G20/OECD Principles of Corporate Governance: Key Challenges ...  - Inputs to revised 2015 CG Principles

4.     The G20/OECD Principles of Corporate Governance 2015: A Critical ...  - Sept 13, 2017



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