Push for Better Corporate Governance Pays Dividends in Japan | American Funds

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sustainable income  |  dividends  |  october 2015
Push for Better Corporate Governance Pays Dividends in Japan

Japanese Companies Are Returning More Cash to Their Shareholders

“It is no longer about being invested in Japan or being out of Japan. You actually have a true distinction between companies that are behaving in a much more shareholder–friendly point of view and companies that are still engrossed in their old-fashioned way of managing the business.”

Gerald Du Manoir
Gerald Du Manoir Portfolio Manager Los Angeles office 27 years of experience (as of 12/31/16)

Dividends and Share Buybacks Are on the Rise in Japan ...

Share buybacks are based on common stocks, excluding purchases from Resolution and Collection Corp. and repurchase of preferred shares. FY2015 and FY2016 are forecasts by Nomura Securities. Figures for dividend growth are the compound annual growth rate.

Sources: Above chart, Nomura Securities, based on companies’ disclosures and Toyo Keizai’s materials. Below chart, FactSet.

... and There May Be Room for Growth

Dividend Growth (%)

1 year

3 year

Yield (%)

Nikkei 225




S&P 500




MSCI Europe








As of 6/30/15.

There are indications that Japanese companies are placing a greater emphasis on investor returns and breaking with a tradition of hoarding cash.

Returns on equity for Japanese businesses historically have lagged companies in other developed markets. In an effort to change that, Prime Minister Shinzo Abe’s administration is pushing for improvements in corporate governance as part of its economic recovery plan. A new corporate governance code encourages companies to focus on profitability, capital efficiency and the appointment of outside directors.

Japanese companies appear to have received the message loud and clear. Some have begun to implement new policies aimed at improving returns on equity. What’s more, dividend payments and share buybacks have been rising in recent years, a trend that the market expects to gain momentum in the coming quarters.

As you can see in the chart above, dividend growth among Japanese companies has outpaced growth in other markets.


Select companies in a wide variety of sectors and industries have been growing dividend payments at a faster rate than the broader Japanese market. Among these are KDDI, an integrated telecom company, electronic components maker Murata Manufacturing and Toyota.

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