By Ken Hokugo
Director, Head of Corporate Governance, Pension Fund Association
Director, The Board Director Training Institute of Japan
There has always been confusion surrounding this topic. From the point of view of those who want to help foreign investors understand the realities of the Japanese market, the most troubling number that is thrown about is the seemingly magic number of “10% or less”. This number is frequently referred to by the media, with the source given as being the reports by a certain analyst at a research institute that is affiliated with a prominent securities firm.
Quite often, we encounter foreign investors who casually believe this widely-touted number of “10% or less” and therefore are not concerned very much (if at all) with the issue of “cross-shareholdings” in Japan, in light of recent improvements in Japan’s corporate governance. Needless to say, it takes a lot of energy to convince such investors that the reality of the Japanese market is different. In this post, I am not trying to scare foreign investors away from Japan’s stock markets, but rather trying to encourage them to invest based on an accurate understanding of the situation in the context of history, culture, and the overall current environment.