Japan’s financial watchdog the Financial Services Agency (FSA) is urging listed companies to adopt a forward-looking strategy when responding to activist investors, emphasising the importance of long-term value creation over short-term defensive measures, according to a report by Reuters.
FSA Commissioner Yutaka Ito said firms can best secure investor confidence by clearly communicating their long-term growth strategies, particularly around capital allocation and future investment plans. He stressed that transparency and consistent engagement are more effective than resisting activist demands outright.
Ito acknowledged that certain activist investors focus on delivering immediate returns, which can at times conflict with sustainable growth objectives. However, he noted that regulatory tools to limit such approaches are constrained, making clear communication the most practical response for companies.
The comments come as Japanese corporates face intensifying scrutiny on capital efficiency, driven in part by reforms spearheaded by the Tokyo Stock Exchange. While these initiatives have led to increased share buybacks and dividend payouts, they have yet to significantly boost corporate investment.
In response, the regulator is preparing updates to Japan’s corporate governance code, which will encourage companies to more rigorously assess how they deploy cash reserves. The focus will be on ensuring funds are used to support growth rather than remaining idle on balance sheets. Ito said feedback from both investors and companies will play a key role in shaping further reforms, highlighting that governance enhancement is an ongoing process.
