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A Historiographical Study of the Cross-Shareholding Structure in Japan and our Six Suggestions to the Management

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Yuya Shimizu, Chief Investment Officer of Hibiki Path Advisors (“Hibiki” “us” or “we”), has written and dispatched attached “Six Suggestions” paper to all of the Presidents and CEOs of our investee company in late August 2023. These suggestions are related to dissolving of cross-shareholding structure that still remains as widely recognized problem in Japan’s capital market.

Here, we acknowledge the fact that finally such cross-shareholding structure, legacy of Showa period, is coming to an end after persisting for too long. It has been sitting around us like “invisible air” and was certainly one of the most notorious things that has prevented these corporates to change their stripes. We touch on many evidences that the landscape is changing fast including the proxy advisors’ recent move against excessive cross-shareholdings.

Our suggestion here to investee companies, if narrowly defined, is about how to move away from cross-shareholdings and still build a solid shareholder base. Moreover, the underlying message is not “just” about cross-shareholdings but about understanding the passage of Japan’s economic development, embracing it whether good or bad, and finally, to accept the changing landscape, in order to move on with decisiveness. It is about how to design the company’s ownership structure as well as the corporate governance structure to “take risks”.

Since the discussion involves all Japanese publicly listed companies and their future direction, we publicized the paper in public now. We also wish that global audience who are generally interested in the trajectory of corporate Japan to read so we also decided to translate it into English. It covers the long paths of Japan’s corporate governance history starting from the Meiji Period and its relatively unknown backgrounds.

It may be challenging for just one small investor to move a rock but with many gathered voices even a mountain can be moved. We would like many overseas investors to join this shareholder counter-revolution movement (ref. Chapter 6 and Chapter 9) which is about time to happen in Japan.

A Historiographical Study of the Cross-Shareholding Structure in Japan and our Six Suggestions to the Management (August 2023)

In late August 2023

Hibiki Path Advisors Pte. Ltd.
Representative Director, Chief Investment Officer
Yuya Shimizu

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