Japan Tokyo Stock Exchange Credit: iStock/Japan Tokyo Stock Exchange
Plans by Japan’s Financial Services Agency (FSA) to get companies to deploy their excess cash could lead to increased investment and share buybacks, Asset Management One says.
The Japanese asset manager said the regulator's reforms to the country's corporate governance code – due to be announced in June – will aim to get companies to use their cash stockpiles, a move it says will give "fresh impetus" to the official drive to improve corporate capital efficiency.
Asset Management One said that Japanese companies, excluding financials, have an average cash-to-assets ratios of 20.8%. This compares to a ratio of around 7.9% for US companies and 8.7% for European businesses.
The asset manager said that, since the Tokyo Stock Exchange started its campaign to improve capital efficiency, corporate governance, and share price performance in 2023, listed Japanese companies have responded by buying back their shares and untangling cross holdings, or stakes in client and supplier companies.
It said share buybacks for the 2025 financial year – the 12 months to the end of March 2026 – were set to hit Y20trn (£93.9bn), a new record.
Asset Management One chief strategist Hitoshi Asaoka said the trend would continue – with sizeable buybacks likely over the next few years, underpinning demand for Japanese equities.
He said: "Major domestic financial institutions, including megabanks and large insurers, have indicated plans to continue selling cross-shareholdings through 2030. The cash raised from these sales can be used to fund shares buybacks."
Asset Management One said planned tax reforms from Prime Minister Sanae Takaichi's government to boost domestic business investment and research in key sectors should also encourage Japanese companies to deploy their cash reserves in search of high returns on investment.
Tokyo wants Japanese companies to invest in strategic areas such as robotics, quantum technologies and semiconductors.
Asset Management One senior product specialist Kazuhiko Hosaka explained: "We think these changes will strengthen incentives for companies to deploy their cash reserves and government initiatives are expected to encourage corporate investment throughout 2026."
