Japanese companies navigate restructuring wave: survey reveals 49% considering overhauls

The survey delves deeper into the specific strategies being contemplated. Mergers and acquisitions (M&A) emerge as a prominent avenue, with close to a third (32%) of respondents eyeing mergers between core businesses for synergy and scale.

Nearly half of Japanese companies are turning inward, eyeing restructuring and strategic shifts to revamp their businesses. This comes as the world’s third-largest economy grapples with sluggish performance and pressure for improved corporate governance.

The sentiment, revealed in a recent Reuters survey conducted by Nikkei Research, signals a decisive move away from business as usual for many Japanese firms. Among the 104 companies polled, a significant 49% are considering reviews or comprehensive restructuring initiatives to enhance corporate value.

The survey delves deeper into the specific strategies being contemplated. Mergers and acquisitions (M&A) emerge as a prominent avenue, with close to a third (32%) of respondents eyeing mergers between core businesses for synergy and scale. Another 26% are contemplating divesting non-core assets to streamline operations and sharpen focus.

This restructuring wave comes amidst a broader push for enhanced corporate governance in Japan. The Tokyo Stock Exchange (TSE) is playing a proactive role, recently publishing a list of companies lagging in shareholder returns and urging them to take corrective action. This public pressure adds to the internal impetus for change driven by shareholder expectations.

The survey further highlights the impact of the TSE’s efforts. While the exchange only publicly discloses companies with compiled or under-consideration action plans, the Reuters survey delves deeper into the specific measures being contemplated. This granular detail provides valuable insights into the internal machinations of Japanese corporations as they navigate a changing landscape.

Beyond M&A and divestitures, the survey reveals other strategies at play. Around 15% of respondents are considering or have already implemented dividend increases, aiming to reward loyal shareholders and attract new investors. Share buybacks and stock splits, though less prevalent, are also on the table for some companies.

This focus on shareholder value aligns with the Japanese government’s broader economic initiatives. In January, Japan expanded the tax-free investment allowance under the Nippon Individual Savings Account (NISA) program, aiming to encourage household participation in the stock market and boost investment activity.

The confluence of internal pressures, external mandates, and government incentives is fueling a restructuring wave across Japan Inc. Whether this marks a turning point for the nation’s corporate landscape remains to be seen, but one thing is clear: change is afoot, and Japanese companies are actively seeking ways to unlock their full potential.