Stock splits have become more common among listed Japanese companies in recent years, and the TSE has again requested that companies reduce their investment units. This article examines the mechanics of stock splits, their impact on share prices and dividends, and the process from the perspectives of both companies and investors.
A stock split is a method of dividing 1 share into multiple shares and increasing the number of shares outstanding. Capital and net assets remain unchanged, so the company's intrinsic value generally does not change. Since 2018, the trading unit for listed Japanese shares has been standardised at 100 shares, and the investment unit is calculated as the share price × 100 shares. Stock splits are therefore used to lower the investment unit and encourage individual investors to participate.
A stock split increases the number of shares outstanding, lowers the share price per share and increases the number of shares held by each shareholder, while the total value of the company and the total value of shareholders' holdings generally remain unchanged. Stock splits also differ from reverse stock splits and gratis allotments of shares. Splits are primarily intended to lower the investment unit and improve liquidity, whereas reverse splits may be intended to raise the investment unit or squeeze out minority shareholders.
The theoretical share price after a stock split is calculated by dividing the pre-split price by the split ratio, but the actual price may differ depending on supply and demand and market sentiment. It is important to understand the schedule of the last day with rights, the ex-rights date and the effective date. The process also involves procedures such as announcing the record date, handling fractional shares and registering changes.
Regarding stock splits, dividends, shareholder benefits and taxes, dividends per share tend to decrease in line with the split ratio after a split, although total dividends often remain essentially unchanged. The conditions for shareholder benefits differ by company, and some companies revise those conditions at the same time as a split. For tax purposes, no tax is imposed at the time of the split; after the acquisition cost is adjusted, gains and losses are calculated when the shares are sold.
As part of the TSE's latest policy, the preferred investment unit is below ¥500,000, and companies with investment units of ¥500,000 or more are required to disclose their reduction policies. A further request for reductions was issued in July 2026, and as of the end of September 2026, approximately 92.9% of listed companies are expected to be targeting an investment unit below ¥500,000. In practice, it is important to assess changes in liquidity and the shareholder base after a split while confirming consistency with business performance and the growth strategy. The TSE's moves and those of major companies are also cited as examples of stock splits.