The chair of the Liberal Democratic Party’s project team explained the details of its corporate governance reform recommendations. The proposals include measures to support medium- to long-term growth investment, and also address concerns about activists who prioritize short-term shareholder returns.
The fundamental challenge facing Japan’s economy today is insufficient supply capacity and competitiveness. Bold corporate growth investment is considered essential to offset the decline in productive capacity accompanying population decline. The government has indicated a policy of creating an environment in which executives can undertake growth investment through measures that ensure predictability across multiple fiscal years and through tax incentives.
While net income at domestically listed companies has reached a record high for 5 consecutive years, growth investment as a percentage of revenue remains at roughly half the level of European and US companies. Against this backdrop, the government has designated 17 priority areas and introduced measures to promote growth. However, securing funding for future growth investment remains a challenge due to the presence of investors and activists seeking only short-term shareholder returns.
The recommendations set out comprehensive measures to support medium- to long-term growth investment and were compiled by the project team. Along with an explanation of the background and process, they indicate an intention to consolidate and coordinate the recommendations of the Headquarters for Japan’s Growth Strategy and the Parliamentary League for Promoting Japan as an Asset Management Center.
As a specific point, the recommendations propose advancing 5 initiatives to support growth investment as a package.