Japan has a complex relationship with activist investors, who look to buy significant stakes in public companies to influence how they are run. Often based outside of Japan but with Japanese staff, activist investors – including individual investors, hedge funds and private equity firms – assess the prospects of a target business to establish if, through changes in operation or management structure, it could be made more profitable. The investors will then begin to obtain shares in the company, often with the goal of joining the board of directors.
The country has seen an increase in activist activity. The structure of Japanese companies has come under criticism from international investors, due to cash-heavy balance sheets which make the companies comfortably liquid, but considerably less profitable when benchmarked against similar companies internationally. And the sums held on balance sheets are significant. At the end of the 2020 fiscal year, companies listed on the Tokyo Stock Price Index held a combined Y493tn ($3.9tn) in cash.
